AUDIT COMMITTEE INDEPENDENCE AND FINANCIAL REPORTING QUALITY OF LISTED MANUFACTURING FIRMS IN NIGERIA: MODERATING ROLE OF PROFITABILITY

Abstract

This study examines profitability as a moderator on audit committee independence and financial reporting quality of listed manufacturing firms in Nigeria. The quantitative, observational, and explanatory correlational research design was adopted, secondary data was extracted from annual reports and accounts of listed manufacturing firms in Nigeria.
Utilizing purposive sampling technique, twenty-five (25) sampled firms out of a population of thirty-four (34) manufacturing firms listed on the Nigerian Exchange from 2012-2023 making it a period of twelve (12) years. The study utilizes panel least square technique. Hausman’s test was carried out and random effect estimate was fitting. The result showed that audit committee independence has a negative and significant effect on financial reporting quality of listed manufacturing firms while the interaction between audit committee independence and profitability reflected a positive and significant effect on financial reporting quality. This implies that firms with higher profitability are more likely to benefit from the presence of independent audit committees in terms of financial reporting quality. It recommends that in order to attain better financial reporting quality, firms should give more attention to the independence of the audit committee and effective asset usage, which can result in financial statements that are more accurate, transparent, and trustworthy. This is beneficial to stakeholders and may improve decision-making as well as corporate governance in general.