EFFECT OF AUDIT COMMITTEE ATTRIBUTES ON FINANCIAL REPORTING FRAUD IN LISTED MANUFACTURING COMPANIES IN NIGERIA

Abstract

Fraudulent financial reporting, which involves the strategic manipulation of financial statements to meet
desired earnings targets or obscure a company‘s true financial performance, is a pervasive problem in
the industry. This practice not only erodes the quality of financial reporting but also poses significant
risks to stakeholders, including investors, creditors, and regulatory authorities. The main objective of this
research is to examine the effect of audit committee characteristics on financial reporting fraud in listed
manufacturing firms in Nigeria. The data were collected from the annual reports and accounts of a sample
of 21 manufacturing companies for the period 2014 to 2023 and were analyzed using the Generalized
Method of Moment (GMM) panel estimation. The results showed that audit committee characteristics
have significant effect on financial reporting fraud in listed manufacturing firms in Nigeria. Specifically,
the results indicate that audit committee size and number of meetings have a significant positive effect on
financial reporting fraud. However, audit committee gender diversity and shareholding significantly
reduce the incidence of financial reporting fraud. This study recommends that the regulators of Nigerian
listed companies, such as the Securities and Exchange Commission should consider reducing the number
of directors that serve on the audit committees of nonfinancial firms to less than six members to enhance
the credibility of financial reports. In addition, regulators of the industry appointment of directors on the
boards of non-financial firms should be based on merit and integrity. Future Codes of Corporate
Governance in Nigeria should deemphasize the appointment to boards and standing committees based on
independence but rather their track record.