Audit Committee Effectiveness in Nigeria: The Perception of ...

International Journal of Management Sciences Vol. 5, No. 2, 2015, 125-135

Audit Committee Effectiveness in Nigeria: The Perception of Professional Accountants Okaro Sunday Chukwunedu1, Okafor Gloria Ogochukwu2, Egbunike Francis Chiedu3 Abstract This study examines the attributes that make for audit committee effectiveness in Nigeria from the perspective of Professional Accountants. A survey research design was adopted for the study. 120 Professional Accountants working as Auditors, Accountants and Accounting Academics in the South Eastern part of Nigeria and randomly selected were targeted at their monthly district society meetings and in their work places. The Professional Accountants were either members of the Institute of Chartered Accountants of Nigeria (ICAN) or members of Association of National Accountants of Nigeria (ANAN). The two bodies are the only officially recognized bodies of Accountants in Nigeria. 89 responses were received constituting 74% of the respondents. We considered this adequate to enable meaningful deductions to be made. A questionnaire in the likert format was used to elicit the responses from the respondents. The data of study was analysed and ranked first on the basis of strongly agree responses and then on the basis of mean of the responses. The hypothesis of study was tested with ANOVA test statistic. Five most important factors stood out as having a strong influence on audit committee effectiveness in Nigeria. These are in that order: - Financial literacy of members - Only non-executive Directors should be members of the Committee - Members must be open to regular training - Members must be able to ask relevant questions - Members must have machinery for periodic evaluation of their performances. Findings add to the scanty literature in this area in Nigeria and have implication for regulatory action. Keywords: Audit, Committee, Effectiveness, Nigeria, Perception. 1. Introduction This study examines the audit committee attributes that are perceived to make for its effectiveness in the Nigerian context. The role of audit committees in enhancing audit and financial reporting quality is well documented in corporate governance literature and derives from agency theory. In Nigeria, the functions and composition of audit committees are clearly spelt out in Company and Allied Matters Act of 1990(CAMA 1990). These duties have further been extended by the Nigerian Security and Exchange Commission (SEC) 2011 Code of Corporate Governance. However, the issue of audit committee effectiveness in Nigeria has been an empirical question. For(Egbiki, 2006), audit committees in Nigeria still have a very long way to go. The world bank report on the state of corporate governance in Nigeria observed that audit committees in Nigeria were weak(Okere, Mustafa, Linde, & Rahman, 2004). More recently, The Institute of Chartered Accountants of Nigeria (ICAN) has also voiced its doubts about the effectiveness of audit committees in Nigeria(Kolafe, 2012). Perhaps, the most damning indictment of audit

1

Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria Department of Accountancy, Nnamdi Azikiwe University, Awka, Nigeria 3 Department of Accountancy, Nnamdi Azikiwe University, Awka. Nigeria 2

© 2015 Research Academy of Social Sciences http://www.rassweb.com

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O. S Chukwunedu et al committees in Nigeria is the assertion that they give false reports and as such the investing public should be wary of such reports(Jimoh & Metu, 2013). Audit Committee effectiveness has been described as the competence with which the audit committee carries out its specified oversight functions(Kalbers & Forgaty, 1993).(Soliman & Ragab, 2013) using Egyptian setting found that audit committee effectiveness constrained discretionary accruals by companies listed in the Egyptian Stock Exchange.(Dezort, Archambeault, & Reed, 2002) defined an effective audit committee as one that has qualified members with the authority and resources to protect stakeholders interests by ensuring reliable financial reporting , internal controls and risk management through its diligent oversight efforts. The authors identified four fundamental determinants of audit committee effectiveness as follows: 1) 2) 3) 4)

Composition- such as expertise, independence, integrity and objectivity Authority- such as responsibilities Resources- such as size and support for internal and external auditors Diligence- such as meeting frequency, incentives and motivation

This study will be guided by the above classifications. This study will be of interest to regulators who will be armed with information on factors that affect audit quality in the Nigerian context for future regulatory interventions. Company management armed with such information should be able to create an enabling environment for an effective audit committee. Audit committee members should leverage on the information provided to arm themselves for effectiveness. This study will proceed as follows; we review relevant literature; we then state our methodology; this will be followed by stating and discussing our findings. We will then conclude. 2. Literature Review The notion of independence that has been widely applied to boards is extended to audit committees to emphasise that they should also be independent if they are to be free from management’s influences and pressures in ensuring that objective financial information is conveyed to shareholders(Karamanou & Vafeas, 2005);(Lin, Xiao, & Tang, 2008).In fact audit committee independence has been described as the most important quality for audit committee members to possess(Munro & Buckby, 2008). Independence aids objectivity and integrity. Many empirical studies endorse the need for an audit committee member to be independent(Owolabi & Dada, 2011). Using Australia and Saudi Arabia setting (Al-lehaidan, 2006) found that audit committee independence was the most important factor in the purchase of non-audit services(NAS) and audit quality by companies listed in the ASX Exchange of Australia. Audit committee independence depends on the appointment and active involvement of outside directors. Proxies for the audit committee’s degree of independence include the percentage of outside directors on the committee and dummy variables indicating a majority or totality of independent directors(He, Labelle, Piot, & Thornton, 2013). In the particular case of Nigeria equal number of shareholders’ representatives and directors make up the composition of the audit committee. The Institute of Chartered Accountants of Nigeria (ICAN) has however called for more representation of stakeholders on the board and the chairmanship also to be reserved for stakeholders’ representatives. This it is argued will help shore up the “visible” independence of the committee(komolafe, 2012). The SEC code of 2011 agrees that the use of non-executive directors will make for greater independence for board committee members. The need for audit committee members to be financially literate is predicted on their needto acquire indepth understanding of financial reporting and improve compliance with regulatory requirements(Samuel, 2012). Financial literacy means the ability to read and understand fundamental financial statements including statement of financial position, income statements and cash flow statements(Velnampy, Sivathaasan, Tharanika, & Sinthuja, 2014).Empirical literature generally agree that Audit Committee 126

International Journal of Management Sciences members should possess financial literacy/expertise. The main plank of the argument by those who hold this view is that the main task of Audit Committees is to oversee corporate financial reporting and auditing processes and as such its members should possess sufficient expertise to understand the issues to be investigated or discussed(Karbhari & Mohiuddin, 2010). The International Accounting Standards Board (IASB) recognize that AC members should have an appropriate degree of financial literacy(IAASB, 2014). In the same manner the Nigerian SEC Corporate Governance Code of 2011 provides that members of the committees should have basic financial literacy and should be able to read financial statements. It even goes ahead to recommend that at least one Board Member of the Committee should be financially literate in Accounting or Financial Management.(SEC, 2011). There is no doubt that valuable experience enhances the effectiveness of AC members. What is not clear is whether holding multiple directorships by AC members makes for AC effectiveness. Proponents believe that multiple directorships of AC members provide them with valuable experience and the opportunity to import good practices and knowledge from other firms. Others argue that multi directorships results in divided attention because of insufficient time. This will lead to lack of commitment in their monitoring functions(Zheng, 2008). Empirical evidence is mixed. For example(Adeyemi, Dabor, & Okpala, 2012) found multiple directorships of AC members as the most significant factor affecting audit quality in Nigeria. On the other hand,(Song & Windram, 2000) found that outside directorships of AC members could undermine AC effectiveness. The Nigerian SEC Code of 2011 encourages multiple directorships of board members but cautions that serving on too many boards at the same time may be counter productive To effectively, deliver their duties AC’s should have adequate and appropriate authority. The authority should clearly spell out the responsibilities, roles and perhaps the power to influence the financial reporting process(Sori, Ali, Hamid, & Evans, 2007). In Nigeria, the Company and Allied Matters Act of 1990 clearly spells out the duties of an AC as follows: - To ascertain whether the accounting and reporting policies of the company are in accordance with legal requirements and agreed ethical practices which will strengthen corporate governance - To review the scope and planning of audit requirements - To review the findings on management matters in conjunction with the external auditor and departmental responses thereon - To keep under review the effectiveness of the company’s system of accounting and internal control, to ensure transparency - To make recommendations to the Board in regard to the appointment, removal and remuneration of the external auditors of the company - To authorize the internal auditor to carry out investigations into any activities of the company that may be of interest or concern to the committee to sustain corporate governance.(Owolabi & Dada, 2011). The 2011 SEC CODE has extended these duties to include: - Overseeing external audit and internal audit - Overseeing compliance and the financial reporting processes - Providing assurance on the effectiveness of internal control and risk management practices of the company and establishing an internal audit function where there is none. - Overseeing management processes for the identification of significant fraud risks and ensuring that adequate prevention, detection and reporting mechanisms are in place. The committee is also required to report regularly to the Board of their audit findings. Audit Committee frequency of meetings remains the dominant proxy for AC diligence although researchers have begun to take issues with this(Wu, 2012). Compensation of AC members, for example, has been put forward as a better proxy for AC diligence(Wan-Hussin & Haji-Abdullah, 2009).The compensation of AC members in Nigeria is of particular interest in this study since CAMA 1990 did not make provision for such compensation. It has been suggested that such an omission does not make for adequate motivation of members to acquit themselves creditably. Another argument is that such a Committee should rarely be expected to be free undue influence and pressure from the main Board. SEC 127

O. S Chukwunedu et al code of 2011prescribes a meeting frequency of at least 3 times annually. In many other climes ACs are Board committees and members receive remuneration either as Board members or Ac members or on both scores.(Wu, 2012). Empirical studies generally agree that more frequent AC meetings will make for its effectiveness(Munro & Buckby, 2008); (Soliman & Ragab, 2013). However,(Madawaki & Amran, 2013) documents AC meeting frequency as being insignificantly associated with audit quality. Beyond the quantitative characteristics of ACs that make for effectiveness, certain qualitative characteristics have been adjudged as necessary for overall effectiveness of the committees. These include - Members collective commitment to fulfill their oversight duties responsibly - Management’s willingness to give full co-operation and support to the access of required information for decision-making(Ashikin, Saat, Karbhari, Xiao, & Heravi, 2012). Other qualities are openness to regular training in both specific skills and general areas of awareness and ability to ask relevant questions.(Hughes, 1999). Yet other qualities include maintaining a good working relationship with both external and internal auditors. Audit committees should also put in place machinery to evaluate itself periodically(Mccarthy, 2013). 3. Research Method The results reported in this study are based on responses from 89 out of 120 Stakeholders from both the public and private sectors of the Nigerian economy working as Accountants, Auditors, Accounting Academics and others identified for the purpose of this study. The respondents were targeted at the monthly meetings of the South Eastern Nigerian district societies of the Institute of Chartered Accountants of Nigeria (ICAN) and Association of National Accountants of Nigeria (ANAN) . The two bodies are the only recognized Professional Accounting bodies in Nigeria. Others were approached in their work places. Once identified, a questionnaire was developed and pilot tested as detailed below: Questionnaire The questionnaire was developed with the aim of identifying factors that make for audit committee effectiveness in Nigeria from the perspective of Stake holders in South Eastern Nigeria. The questionnaire developed consisted of two sections Section A was made up of four questions about the respondent’s designation in the work place, years of experience in the current position, the highest academic/ professional qualification attained and the gender (see appendix). Section B consists of 15 questions. The first 14 questions required individuals to rate their extent of Agreement or Disagrrement with each of the statement based on a 5- point Likert scale ranging from (5) Strongly Agree to (1) Strongly Disagree. Question15was open- ended and was meant to elicit other audit committee effectiveness factors not captured in the questionnaire. The 3 authors were accounting professionals and meticulously went through the questions before they were administered. The questions were administered and retrieved largely by hand. At the end of the exercise 89 valid responses had been received representing a response rate of 75% which was considered adequate for meaningful analysis and conclusions to be drawn from the data provided by the respondents. Characteristics of the Respondents The background information section of the question was aimed at obtaining data relating to the characteristics of the respondents. Question 1 asked the respondents to indicate their gender. The results suggest that 75 were male while only 14 were female. This is not surprising given that the Professions and the Academia in Nigeria are still largely dominated by the men. Question 2 asked the respondents the designation of their jobs.37 (41.6%) were engaged as Accountants while 26 (29.2%) were employed as Auditors. Accounting Academics were 17(19.1%) while others not classified were 9 (10.1%). The third question was on the experience garnered in the respondents’ current positions. 33 (37.1%) had less than 5 years’ experience, 32 (36%) had between 5- 10 years’ experience while 24 (27%) had over 10 years’ experience. Finally, question 4 wanted to know the academic qualifications of the respondents. 72 (80.9%) 128

International Journal of Management Sciences had a first degree, 15 (16.9%) had a Masters’ degree while 2 (2.2%) had a doctoral degree. The respondents were thus highly qualified and experienced. 4. Results and Discussions Table 1: Rank of Audit Committee Effectiveness Factors by Extent of Agreement S/N SA Q1) An audit committee member 69 should be financially literate. 77.5% Q2) An audit committee member 22 should be remunerated 24.7% Q3) Executive directors should not 40 be members of audit committee 44.9% Q4) The chairman of the committee 40 must always be a representative of 44.9% shareholders Q5) Frequency of meetings of audit 27 committee must be at least 4times a 30.3% year. Q6) Audit committee members 40 must be open to regular training 44.9% Q7) Audit committee members 54 must be able to ask relevant 60.7% questions Q8) Audit committee members 27 must hold annual private meetings 30.3% with company external and internal auditors Q9) Audit committee members 4 should approve any non-auditing 4.5% services to be performed by the external auditor of their companies. Q10) Audit committee members 45 must put in motion mechanism for 50.6% periodic evaluation of their performance as a committee. Q11) The law should be amended 32 for greater representation for 36.0% shareholders than company management Q12) The appointment and 22 remuneration of external auditors 24.7% should be handled by members of the audit committee Q13)Multiple directorships in other 4 companies will enhance the 4.5% effectiveness of audit committee members Q14) On the whole the average 16 audit committee in Nigeria is not 18.0% effective. Source: Field Survey (2014) ᵇ Ranking is by the 2nd Column (Strongly Agree)

A 18 20.2% 39 43.8% 31 34.8% 24 27.0%

ID 2 2.2% 7 7.9% 3 3.4% 7 7.9%

D -

SD -

15 16.9% 12 13.5% 16 18.0%

6 6.7% 3 3.4% 2 2.2%

Total/(Rank)ᵇ 89 1st 89 10th 89 5th 89 6th

38 42.7%

12 13.5%

11 12.4%

1 1.1%

89 9th

44 49.4% 32 36.0%

3 3.4% 2 2.2%

2 2.2% -

1 1.1%

89 4th 89 2nd

41 46.1%

4 4.5%

9 10.1%

8 9.0%

89 8th

19 21.3%

16 18.0%

27 30.3%

23 25.8%

89 13

41 46.1%

2 2.2%

-

1 1.1%

89 3rd

38 42.7%

7 7.9%

8 9.0%

4 4.5%

89 7th

33 37.1%

7 7.9%

17 19.1%

10 11.2%

89 11th

21 23.6%

25 28.1%

29 32.6%

10 11.2%

89 12

30 33.7%

16 18.0%

21 23.6%

6 6.7%

89

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O. S Chukwunedu et al To ascertain the factors that make for audit committee effectiveness in Nigeria, respondents were asked to indicate on a 5-point Likert scale the extent of their agreement or disagreement with the 14 questions related to audit committee effectiveness in Nigeria included in the questionnaire ranging from Strongly disagree to Strongly agree. The results presented in Table 1 indicate that out of the 14 audit committee effectiveness statements put to the respondents, the highest ranked in terms of percentage of people who “Strongly agree “ is statement number 1 in part B of the questionnaire which states that “ an audit committee member should be financially literate”. 69 or 77.5 % of respondents strongly agreed with this assertion. Perhaps, this is a recognition that audit committee work involves, in part dealing with accounting numbers. The second most popular audit committee effectiveness factor is that audit committee members must be able to ask relevant questions. 54 or 60.7% of respondents strongly agreed with this statement. The third most popular audit committee effectiveness factors identified by the respondents is the statement that audit committee members must put in motion mechanism for periodic evaluation of their performance as a committee with 45 or 50.6% of respondents strongly agreeing. The other significant audit committee effectiveness factors included the fact that audit committee members must be open to regular training(ranked fourth); Executive directors should not be members of audit committees ( ranked fifth); The chairman of audit committee must be representatives of shareholders (ranked 6th); The law should be amended to allow for greater representation of shareholders than company management(ranked seventh); Audit committee members must hold annual private meetings with company external and internal auditors( ranked 8th); Frequency of audit committee meetings must be at least 4 times annually(ranked 9th) Table 2: Rank of Audit Effectiveness Factors by Mean s/n 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Question Description An Audit Committee member should be financially literate An audit committee member should be remunerated Executive Directors should not be members of audit committee The chairman of the committee must always be a representative of shareholders Frequency of meetings of audit committees must be at least 4 times a year Audit committee members must be open to regular training Audit committee members must be able to ask relevant questions Audit committee members must hold annual private meetings with company's external auditors and internal auditors Audit committee members should approve any non-auditing service to be performed by the external auditor of their companies Audit committee members must put in motion mechanism for periodic evaluation of their performance as a committee The law should be amended to provide for greater representation for shareholders than company management The appointment and remuneration of external auditors should be handled by members of the audit committee Multiple directorships in other companies will enhance the effectiveness of audit committee members On the whole the average audit committee in Nigeria is not effective Source: Field Survey (2014)

N 89 89 89 89

Mean 4.7528 3.6292 4.0449 3.9438

Std. Deviation .48338 1.21900 1.15709 1.20943

Rank 1st 10 5 7

89 89 89 89

3.8876 4.3708 4.5506 3.7865

1.01621 .66370 .65732 1.23833

8 4 2 9

89

2.4831

1.21648

13

89

4.4494

.65732

3

89

3.9663

1.10216

6

89

3.4494

1.34849

11

89

2.7753

1.07400

12

89

3.3258

1.21333

The remaining factors which had all less than 30% of respondents agreeing are: that an audit committee member should be remunerated ( ranked 10th); That the appointment and remuneration of external auditors should be handled by audit committee members (ranked 11th). Respondents rejected the assertion that multiple directorships of audit committee members will enhance the effectiveness of audit committee members.( 39% said no while only 25 % said yes.). On the vexed issue of non-auditing services, 130

International Journal of Management Sciences respondents did not approve that the responsibility of approving such services should be vested in the members of the audit committee.( 50 did not approve while 19 approved). 46(51.7%) of respondents agreed that the average audit committee in Nigeria is ineffective. 27(30.3%) thought otherwise. In order to quantify the significance of audit committee effectiveness factors, the 5-point likert scale was coded with values from 5(strongly agree) to 1(strongly disagree). The descriptive statistics after this exercise are in table 2 The results indicate that most of the problems are ranked the same as in table 1 For example the ranking of statements1,2,3, 6,7,9,10, 12 and 13 is consistent in both tables 1 and 2. However slight differences exist in the ranking of some of the statement. While table 1 ranked statement number 4 as 6 th, table 2 ranked it as 7th. Statement number 5 is ranked 9th in table 1 but 8th in table 2. Statement number 8 is ranked 8th by table 1 but 9th in table 2. Finally, statement number 11 is ranked 7th in table 1 but 6th in table 2. Despite the slight differences in ranking which is due to the different ways of quantifying the significance of the audit effectiveness factors it is clear that the five most significant audit committee effectiveness factors are that audit committee members must be financially literate; that executive directors must not be members of audit committees; that audit committee members must be open to regular training; that audit committee members should be able to ask relevant questions and that members of the audit committees must be able to put in motion machinery for periodic evaluation of its performance as a committee. Over a third of the respondents strongly agreed with the five statements relating to the five audit committee effectiveness factors. In terms of the means all the five statements have a mean rating of four and above out of a possible five suggesting that the respondents view these as significant problems. In order to find out whether the responses were influenced by the professional affiliation of respondents we ran a one way ANOVA test taking as our null hypothesis that no significant differences exist in the opinion of respondents as a result of professional affiliation. The result is shown in table 3 Table 3- Test of Statistical Difference among Respondents as a Result of Professional Affiliation ANOVA Test Result for Hypothesis One(output of SPSS Ver.20) HYP.1 Sum of Squares df Mean Square F Sig. Between Groups 2.204 2 1.102 1.161 .318 Within Groups 81.607 86 .949 Total 83.811 88 Source: from the field survey (2014)

Our decision rule was based on the computed F-value: the decision rule is as follows if F computed > F table value – rejects the null hypothesis; otherwise accept. Since 1.161< 2.35, the null hypothesis is accepted and the alternate rejected. The final question (question 15) asked respondents to make any further suggestion that could enhance audit committee effectiveness in Nigeria. One respondent advised that beyond theory, audit committee members should demonstrate commitment and work hand in hand with the board of directors to achieve the lofty objectives that informed the establishment of the committees. Another cautioned that whatever compensation is made to audit committee members should be allowances and not remuneration per se. Finally, another respondent emphasized the need for exposure of audit committee members to constant training and retraining to enable them perform optimally.

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O. S Chukwunedu et al 5. Summary and Conclusion The objective of the study was to investigate the factors that will make for audit committee effectiveness in Nigeria. To achieve this objective, the study used a questionnaire survey to find out the opinions of 120 individuals targeted for the study. 89 usable responses were obtained upon which the results of this paper are based.The results were analysed and ranked following two approaches. The first approach was to rank the importance of the 13 effectiveness factors based on the highest percentage of people “strongly agreeing” with each statement. The questionnaire was also analysed and ranked after assigning numerical values between five and one, (5) for strongly agree to(1) for strongly disagree for questions one to 14 in part B. According to the descriptive statistics results, the ranking of 9 effectiveness factors were the same under both methods. However five factors were highly significant on both methods. These are that members of audit committees must be financially literate; Executive directors must not be members of Audit Committees; Audit committee members must be open to regular training; Audit committee members must be able to ask relevant questions and Audit committee members must set up machinery for periodic evaluation of their performance. We ran an ANOVA test to determine whether respondents’ opinions differed in any way due to professional affiliation. Our result did not show any statistical difference. Overall, the results are consistent with Audit committee effectiveness literature which suggests that there are critical factors for audit committee effectiveness. However, our study suggests that in the particular circumstances of Nigeria the “soft factors appear to be more important.. Our result should be interpreted in the light of its limitation. Investors were not particularly represented in the study.. Despite this limitation, we believe that the study has made useful contribution to the scanty audit committee effectiveness literature in Nigeria. References Adeyemi, S. B., Dabor, E. L., & Okpala, O. (2012). factors affecting audit quality in Nigeria. International Journal of Business and Management, 3(20), 198–209. Al-lehaidan, I. (2006). audit committee effectiveness : Australia and Saudi Arabia. doctoral thesis, VictoriaUniversity, Victoria Ashikin, N., Saat, M., Karbhari, Y., Xiao, J. Z., & Heravi, S. (2012). Factors affecting independent audit committee members ’ effectiveness – The case of listed firms on Bursa Malaysia. World Review of Business Research, 2(3), 132–147. Dezort, F. T., Archambeault, D. S., & Reed, S. A. (2002). Audit committee effectiveness: a synthesis of the empirical audit committee literature. Journal of Accounting Literature, 21, 38–75. Egbiki, H. (2006). Whistle blowing culture imperative for anti- corruption crusade. The Guardian. He, L., Labelle, R., Piot, C., & Thornton, D. B. (2013). Board monitoring, audit committee effectiveness and financial reporting. Retrieved July 26 from http://ssrn.com/abstract Hughes, R. (1999). The rise and rise of the audit committee. Accountancy, 123, 59. IASB. (2014). A FRAMEWORK FOR AUDIT QUALITY (pp. 1–63), International Accounting Standards Board, New York. Jimoh, W., & Metu, P. (2013). Dont trust audit committe reports. Retrieved August 17 fromallAfrica.com. Kalbers, L. P., & Forgaty, T. J. (1993). Audit committee effectiveness: An empirical investigation of the contribution of power. Auditing: A Journal of Practice and Theory, 12(Spring), 24–49. Karamanou, I., & Vafeas, N. (2005). The Association between corporate boards , audit committees , and management earnings forecasts : An empirical analysis. Journal of Accounting Research, 43(3), 453–486. doi:10.1111/j.1475-679X.2005.00177.x 132

International Journal of Management Sciences Karbhari, Y., & Mohiuddin, M. (2010). Audit committee effectiveness : A critical literature review. AIUB Journal of Business and Economics, 9(1), 97–125. Kolafe, B. (2012, May 17). ICAN queries efficacy of audit committees in Nigeria. vanguard. lagos. Lin, Z. J., Xiao, J. Z., & Tang, Q. (2008). The roles , responsibilities and characteristics of audit committee in China. Accounting, Auditing and Accountability Journal, 21(5), 721–751. doi:10.1108/09513570810872987 Madawaki, A., & Amran, N. A. (2013). Audit committees: How they affect financial reporting in Nigerian companies. Journal of Modern Accounting and Auditing, 9(8), 1070–1080. Mccarthy, M. P. (2013). Ten principles of effective audit-committee oversight. KPMG. Munro, L., & Buckby, S. (2008). Audit committee regulation in Australia: How far have we come? Australian Accounting Review, 18(4), 1–14. doi:10.1111/j.1835-2561.2008.0020.x Okere, O., Mustafa, A., Linde, G. Van der, & Rahman, Z. (2004). Report on the observance of standards and code: Accounting and auditing (pp. 1– 24). Washington. Owolabi, S. A., & Dada, S. . (2011). Audit committee : An instrument of effective corporate governance. European Journal of Economics, Finance and Administrative Sciences, 35(35), 174–183. Samuel, G. (2012). Attributes oF audit committee members and quality of financial reporting in banks in Nigeria. Doctoral thesis, Ahmadu Bello, Zaria SEC, D. G. (2011). SEC New Code of Corporate Governance. SEC (pp. 1–29). Abuja. Soliman, M. M., & Ragab, A. A. (2013). Audit committee effectiveness , audit quality and earnings management : An empirical study of thelisted companies in Egypt.World Academy for Science and Technology. Song, J., & Windram, B. (2000). Benchmarking audit committee effectiveness in the UK Working Paper, Napier University. Sori, Z. M., Ali, M., Hamid, A., & Evans, J. G. (2007). Audit committee authority and effectiveness : The perceptions of Malaysian senior managers. international research Journal of finance and Economics, (8), 42–56. Velnampy, T., Sivathaasan, N., Tharanika, R., & Sinthuja, M. (2014). Board leadership structure , audit committee and audit quality : Evidence from manufacturing companies in Sri Lanka. International Journal of Business and Management, 9(4), 76–85. doi:10.5539/ijbm.v9n4p76 Wan-Hussin, W. N., & Haji-Abdullah, N. M. (2009). Audit committee attributes, financial distress and the quality of financial reporting. Working Paper University of Utara, Malaysia. Wu, J. Y. (2012). Audit Committee Effectiveness - from the perspective of audit committee members in New Zealand listed Companies. Doctoral thesis Lincoln University, NewZealand. Zheng, X. (2008). An empirical analysis of the relationship between audit committee multiple directorships and financial reporting quality. Drexel.

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O. S Chukwunedu et al Questionnaire Audit Committee Effectiveness and Audit Quality- An Empirical Study. Dear Respondent, Audit committee is a very important body in the corporate governance of all publicly quoted companies in Nigeria. However, the effectiveness of this body in Nigeria has been called to question given the spate of accounting and audit irregularities in many Nigerian listed companies. This study is an attempt to empirically investigate the effectiveness of audit committees in Nigeria. We therefore solicit your assistance in completing this questionnaire which has been designed to take only a little part of your time. We assure you of the confidentiality of any information given to us as this study is only for academic purpose only. Please indicate whether you would want a copy of our findings from this research. Please also note that the number in the questionnaire is only meant for tracking the progress of the the document. The researchers can be reached on the following telephone lines; 08033803438; 08038676966; 08132850409. We sincerely thank you. Okaro, S.C, Okafor, G.O . Egbunike, C.F. Section A Demographic information a) Gender of Respondent [ Male] [Female] b) Designation of Respondent [ Auditor] [Accountants] [ Accounting Academics] [ Financial Analyst] [Stock Broker] [Banker] [Manager] [Investors/Shareholder] [Other Users of Financial Statements] c) Number of Year experience in Present position [ less than 5 years] [ Between 5-10 years] [ Over 10 Years] d) Highest Academic/ Professional Qualification [ Bsc] [ Master’s degree] [ Phd] [ ACA] [ANAN] [ACCA] [ Others (Specify) ] Section B Please tick (√) for your preferred Option Serial Number 1

2

3

4

5

Statement

Strongly Agree

Agree

Undecided

Disagree

Strongly Disagree

An Audit Committee member should be financially literate An audit committee member should be remunerated Executive Directors should not be members of audit committee The chairman of the committee must always be a representative of shareholders Frequency of meetings of audit committees must be at least 4 times a year. 134

International Journal of Management Sciences 6

Audit committee members must be open to regular training

7 Audit Committee members must be able to ask relevant questions 8

9

Audit committee members must hold annual private meetings with company’s external auditors and internal auditors Audit committee members should approve any nonauditing service to be performed by the external auditor of their companies.

10

Audit Committee members must put in motion mechanism for periodic evaluation of their performance as a committee

11

The law should be amended to provide for greater representation for shareholders than company management

12

The appointment and remuneration of external auditors should be handled by members of the audit committee

13

Multiple directorships in other companies will enhance the effectiveness of audit members

14

On the whole the average audit committee in Nigeria is not effective.

15 Please add any other comments as you deem fit in respect of audit committee effectiveness in Nigeria.

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