Figure 1 - from "Audit Committee and Earnings Management in Quoted Manufacturing Firms in Nigeria"

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Table 1. Descriptive Statistics of the Variables Table 1 present the descriptive statistics for the dependent and the independent variables. Discretionary accrual which is the explained variable of the study has a minimum value of -0.002 and a maximum value of 0.20. The mean value of the DAC is 0.04 with a standard deviation of 0.03. This discloses that there is a low discrepancy in the nature in which the manufacturing firms engaged in earnings management. The table also implies that the average figure for audit committee expertise is 0.28 and the standard deviation is 0.21. This implies that on average about 28% of the audit committee members are financial expertise and these guide is similar in the sampled manufacturing firms as shown in the standard deviation figure. The minimum and the maximum value is 0.19 and 0.77 respectively.

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Table 3. Multicollinearity test The conventional postulation of OLS regression model among others is the normality of error terms distribution and their independence. The independent variables are not absolutely correlated i.e. absence of multicollinearity; and the variance of error terms is constant i.e. Homoskedastic. When these assumptions are met, the estimators are biased and cannot be used in reaching any conclusion.

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Table 4. Random Effect Regression Result Table 4 shows the random effect regression result chosen for the study going by the hausman test. The result shows that the explanatory variables, audit committee attributes (audit committee financial expertise, audi committee tenure, and audit committee shareholder ownership) can explain up to 38.72% of the shift in the earnings management of the sampled listed manufacturing firms while the remaining percentage is clarified by other factor: which the model did not capture. The F- statistics chi square is 65.64 with a p-value of 0.0000 which shows that the

Abu Muhammad, Aliyu Ibrahim

Audit Committee and Earnings Management in Quoted Manufacturing Firms in Nigeria

Abstract: This study evaluates the audit committee impact on earnings management of listed manufacturing companies in Nigeria. The study uses secondary data which were extracted from ten (10) sampled manufacturing firms listed in the Nigerian Stock Exchange (NSE) for the period 2010-2019. The study used Random Effects Model (REM) for the analysis of data. The results showed that financial expertise of audit committee has significant negative impact on earnings management while audit committee tenure has an insignificant negative impact on earnings management. Furthermore, share ownership of audit committee has significant negative impact on earnings management. The study therefore, concludes that both the audit committee expertise and share ownership of audit committee enhance the financial reporting quality of manufacturing firms in Nigeria. Based on the impact of members of audit committee with financial expertise, the study recommends among others that, the board should ensure appointing the sufficient audit committee members that are experts on financial matters. Similarly, the study also recommends the enclosure of more members with substantial shareholdings in the audit committee. This can enhance their willingness to protect their investment and helps in proper monitoring and supervision, thereby reducing earnings management.

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