1.1 Background to the Study
The governance structure of an entity can play an important role in monitoring and safeguarding the independence of its external auditor. The exact form of an entity governance structure and the role any government body perform in relation to the external auditor may vary depending on the requirements of national laws. In some jurisdictions, a single body commonly known as a “audit committee” oversee all matters relating to the external auditors.
Stricter standards of accountability cannot be achieved without an effective internal control structure. One way that public officials can enhance accountability and demonstrate proper stewardship over public funds is to establish and support on adequate control environment within their organizations. A critical element of the control environment is an independent of management on matters of financial reporting and internal control.
An effective audit committee can provide several important aspect of control including ensuring the independence of the internal auditing function and ensuring appropriate action is taken on audit findings.
The audit committee serves in a unique capacity as an important communication link between external and internal auditors and operating management and means of reducing the risk management override of key elements of the organization internal control structure.
Hence an attempt to find out what will determine the audit committee independence in corporate government is what this research work seeks to address.
1.2 Statement of Problem
One of the foremost functions of the audit committee is to review the financial data of the company on continuous basis and strengthen internal accounting controls, in order to enhance reliability and integrity of financial reporting.
The spate of audit failure in the world, especially in Nigeria, has brought great disappointments to the users of financial reports. The cause of the problem has been linked to lack of effective oversight of audit committee which has also been linked with creative accounting. In Nigeria, the challenge of audit committee and audit quality reporting have not attracted much empirical studies beyond mere unreliable opinions.
Given the above scenario, the major problem for this study is to determine whether audit quality can significantly be influenced by audit committee characteristics of Nigerian Listed firms. The study attempts to ascertain and establish whether there are significant relationships between audit committee independence and corporate governance in Nigerian Listed firms.
1.3 Research Questions
The research questions of this study are as follows:
i. To what extent does the composition of audit committee affect decision making?
ii. To what extent does independence influence audit quality?
iii. To what extent do audit committee members’ qualifications influence decision making?
1.4 Objectives of the Study
The following are the objectives of the study;
i. To find out if the composition of audit committee affect decision making.
ii. To ascertain if independence influence audit quality.
iii. To determine if audit committee members’ qualification influence decision making.
1.5 Statement of Hypotheses
This study will rest the hypothesis below.
The composition of audit has no significance effect on decision making.
Independence does not influence audit quality.
There is no significant relationship between audit committee members qualifications and decision making.
1.6 Significance of the Study
Since the inception of audit committee public companies as stated in CAMA section 359 (3) many have underscored the roles and responsibilities of the committee. Hence, in attempt to revive the committee this research work will assist companies to know how they can revive the committee redirect individual minds and assist future researchers to know areas when they should research.
The specific significance includes:
a. It will ensure free and fair play, in terms of investment by investors.
b. It will enable corporate owners to know how exactly to motivate the committee members for effective accountability and transparency in corporate reporting.
c. It will encourage government to insist that audit committee should be setup even by private companies.
1.7 Scope of the Study
The scope which is otherwise referred to as delimitation of the study shall cover the Nigeria Stock Exchange Benin City. Emphasis is placed on the following areas: significance of the determinant of audit committee independence. A time frame of five years (2011 to 2015) was adopted in this study using a sample size of 120 was used for effective result.
1.8 Limitations of the Study
The major limitation of the study as it was with several studies in developing economies was data accessibility and accuracy. Also, there was the challenge of inappropriate measurement of variables. Another challenge faced in the course of this field work was time factor and inadequate funds.