Effects of Audit Committee Financial Expertise on Financial Reporting Quality of Quoted Deposit Money Bank (DMBs) in Nigeria

Abstract

The reliance and expectation of stakeholders on the authenticity, and fairness of the financial statements and annual reports cannot be over emphasized. In order to achieve this, quality auditing must be carried out so as to maintain financial reporting quality. This study investigated the effect of audit committee financial expertise on financial reporting quality of quoted deposit money banks in Nigeria. Secondary sources of data were used to gather the data. Financial statements of (12) deposit money banks (DMBs) were selected for the period of twelve years (12) ranging from 2009-2020. Ex-post facto design was adopted in carrying out this research. The independent variable which is Audit committee Financial Expertise was proxied by the Number of committee members with Financial Expert (NFE) and dependent variable which is Financial Reporting Quality was proxied by Discretionary Loan Loss Provision (DLLP). Panel pooled data OLS regression technique (fixed effect) was employed and was analysed via E-Views 10. The result showed that Number of committee members with Financial Expert (NFE) has a positive and statistically significant effect on DLLPof quoted deposit money banks (DMBs).The study concludes that, in line with the qualification and experience requirement as indicated by the Security and Exchange Commission (SEC), financial reporting is enhanced when well-qualified and trained financial Experts are visible in the audit committee. Therefore the study recommends that, since bank managers have discretionary powers to influence the level of loan loss provisions, majority of the audit committee members should be financially literate, as this will stand as a yardstick for scrutinizing and overseeing the financial reporting processes.