Audit committee and financial statement fraud likelihood

This paper examines the effects of audit committee characteristics on the financial statement fraud likelihood of 134 firms in Nigeria listed Main Board of the Nigerian Exchange for a period of 2013-2022. We use descriptive analysis, correlation analysis and panel Random Effects Generalised Least Square analysis to analyze the data, which were extracted from the annual reports and accounts of the sampled firms. The results show that the appropriate model is Random Effects Model after testing for Hausman specification. Audit committee independence and audit committee female gender are negatively significant relative to financial statement fraud likelihood. There is no significant relation between audit committee size and audit committee meetings in relation to financial statement fraud likelihood. This paper has the potential to inform regulators, boards of directors, and forensic accountants who are concerned with improving the oversight of listed firms and reducing opportunities for managers and others to engage in financial fraud. This study suffers from some limitations. First, the study sample is limited to only 1,340 observations. However, this is due to number of listed firms on main board of the NGX. Second, the study period ended in 2022. Third, although this study examines the effect of audit committee, not all the audit committee aspects have been examined in the study model. Nevertheless, this paper is significant to regulators, market players, credit agencies, banks, shareholders, and boards of directors, management, lenders (creditors), and a number of other stakeholders. It offers empirical evidence for both policy improvement, performance improvement, future research and it provides additional body of knowledge.