EFFECT OF AUDIT COMMITTEE ATTRIBUTES ON EARNINGS MANAGEMENT IN LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The integrity of financial reporting remains a fundamental concern in corporate governance because reliable financial information is essential for informed decision-making by all relevant stakeholders. This study examined the effect of audit committee attributes and earnings management among listed deposit money banks in Nigeria from 2013 to 2025. The proxies for audit committee attributes are audit committee independence, financial expertise, and size. While earnings management is proxied by the Loan Loss Provision (LLP). The study adopted an ex-post facto research design, using secondary data from the annual reports and financial statements of 10 listed deposit money banks in Nigeria. The Generalised Least Squares (GLS) method is adopted in testing the hypotheses. The findings revealed that audit committee independence has a significant negative effect on LLP, while audit committee financial expertise and audit committee size show insignificant effects on LLP. The study concludes that audit committee independence has a significant negative effect on loan loss provision among listed deposit money banks in Nigeria. The result suggests that banks with a higher proportion of independent audit committee members are more effective in monitoring management and ensuring prudent financial reporting practices. Specifically, independent audit committees help reduce managerial discretion in determining loan loss provisions, thereby limiting the use of provisions as a tool for earnings management. Overall, the evidence indicates that strengthening audit committee independence can improve the quality of loan loss provisioning decisions, enhance credit risk management, and promote financial stability within the Nigerian banking sector. Consequently, regulators and bank stakeholders should continue to encourage greater independence among audit committee members to improve corporate governance and safeguard the integrity of financial reporting. Based on the conclusion, the study recommends that deposit money banks should increase the proportion of independent members on their audit committees. Independent members are better positioned to provide objective oversight of financial reporting and loan provisioning decisions, thereby reducing managerial discretion and improving the quality of financial disclosures.