Measures of Audit Committee Effectiveness in Nigeria

Abstract

There has been increased focus on the activities of audit committees due to high-profile cases of financial scandals unsettling business executives and organizations. A reliable audit report facilitated by an effective audit committee is now imperative in corporate organizations. Empirical and statistical evidence supports committee tenure, financial expertise, and independence as having significant direct correlation with audit committee effectiveness. However there is no statistical evidence proving that committee size and the frequency of committee meetings impact positively on audit committee effectiveness, as these are discretional, charter-based determinants. Therefore, to forestall the occurrence of anomalies in financial disclosures and to protect corporate reputation and diverse interests of various stakeholders, audit committees must be seen to have the power to probe, forensically and otherwise, management programs and other financial projects. In addition the audit committee has the corporate governance role to monitor, in stricter details, the activities of both Internal and External Audit to prevent biased and scandalous disclosures. The foregoing role of the committee is of utmost importance, as the credibility of financial statements remains the most accurate way of informing shareholders and other stakeholders about the financial performance, progress and position of the company.