Audit Committee Effectiveness and Audit Fee among Listed Deposit Money Banks in Nigeria

Main Article Content

Abdulrasaq Mustapha
Abdulrauf O. Isiaka
Kudirat A. Babatunde

Abstract

The persistent cases of corporate accounting scandals which have rocked the Nigerian banking sector in spite of auditor certification of financial statements as free from material error have raised concern not only on the effectiveness of audit committees but also on audit services despite the huge amount charged on their clients. Hence, this study examined the effect of audit committee effectiveness on audit fee of listed deposit money banks in Nigeria. Using an ex-post facto research design, the data sourced through the annual reports of twelve (12) banks for the period between 2012 and 2018 were analysed using random-effect regression analysis. The result of the study revealed that audit committee effectiveness proxy with audit committee audit committee expertise (t-value =3.22 & p-value = 0.000), audit committee diligence (t-value = 3.57, & p-value = 0.000) and audit committee gender diversity (t-value = 3.85 & p-value =0.000) has significant positive effect on audit fee of listed deposit money banks in Nigeria. This implies that an effective audit committee would demand for high audit quality service from the auditor, thereby increasing the audit efforts and time which subsequently result to higher audit fee. The study concluded that an effective audit committee would demand high audit service from the external auditor thereby ensuring that the financial statement published is relevant and of faithful representation.

Keywords:
Audit committee effectiveness, audit fee, diligence, expertise, code of corporate governance, gender diversity.

Article Details

How to Cite
Mustapha, A., Isiaka, A. O., & Babatunde, K. A. (2020). Audit Committee Effectiveness and Audit Fee among Listed Deposit Money Banks in Nigeria. Asian Journal of Economics, Business and Accounting, 20(4), 1-14. https://doi.org/10.9734/ajeba/2020/v20i430329
Section
Original Research Article

References

Ohidoa T, Okun OO, Omokhudu firms attributes and audit fees in Nigeria Quoted Firms. International Journal of Academic Research in Business and Social Sciences. 2018;8(3):685–699.

Egbunike AP, Ezelibe CP, Aroh NN. The influence of corporate governance on earnings management practices: A study of some selected listed companies in Nigeria. American Journal of Economics, Finance and Management. 2015;1(5):482-493.

Hay DC, Knechel RW, Wong N. Audit fees: A meta-analysis of the effect of supply and demand attributes. Contemporary Accounting Research. 2006;23:141-191.

Loukil L. Audit committees and audit fees: an empirical study in large french listed companies. Journal of Accounting Business & Management. 2014;21(2):36-53.

Sarbanes-Oxley Act. 107th Congress of the United States of America. Washington DC; 2002.

Securities and exchange commission of Nigeria code of corporate governance for public companies in Nigeria; 2016.

DeAngelo LE. Auditor independence, low balling and disclosure regulation. Journal of Accounting & Economics. 1981;3(2): 113-127.

Hope O, Langli JC. Auditor independence in a private firm setting. Working Paper No 1/2007. Norwegian School of Management; 2007.

Cahan SF, Sun J. The effect of audit experience on audit fees and audit quality. Journal of Accounting, Auditing & Finance. 2014;11(7):1-23.

Agoes S. Auditing salemba empat: Jakarta; 2012.

Ghafran CM, O'Sullivan N. The impact of audit committee expertise on audit quality: Evidence from UK audit fees. British Accounting Review. 2017;49(6):578-593.

The institute of chartered accountants of nigeria scale of professional fees. Revised Edition; 2011.

Imani M, Abdi A, Olum MKA. Investigating the impact of gender diversity in the audit committee on the audit fees of companies listed in Tehran Stock Exchange. Accounting and Auditing Review. 2017; 24(3):303-322.

Jizi M, Nehme R. Board monitoring and audit fees: The moderating role of CEO/chair dual roles. Managerial Auditing Journal. 2018;33(2):217–243.

Miglani S, Ahmed K. Gender diversity on audit committees and its impact on audit fees: Evidence from India. Accounting Research Journal. 2019;32(4):568-586.

Yasin F, Nelson SP. Audit committee and internal audit: Implications on audit quality. International Journal of Economics, Management and Accounting. 2012; 20(2):187-218.

Bendickson J, Muldon J, Liguori E, Davis PE. Agency theory: The times, they are a-changin. Management Decision. 2016;54(1):174-193.

Jensen M, Meckling W. Theory of the firm: Managerial behaviour, agency costs and ownership structure. Journal of Financial Economics. 1976;3(4):305-360.

De Zoort FT. An investigation of audit committees oversight responsibilities. ABACUS. 1997;33(2):208-227.

Norziaton IK. Audit committee and audit fees in high regulated firms: Moderating role of regulatory oversight; 2019.

Abbott LJ, Parker S, Peters G, Raghunandan K. The association between audit committee characteristics and audit fees. Auditing: A Journal of Practice & Theory. 2003;22(2):17–32.

Vafeas, N., &Waegelein, J. (2007). The association between audit committees, compensation incentives and corporate audit fees. The Review of Quantitative Finance and Accounting, 28(3): 241-255.

Hoitash R, Hoitash U. The role of audit committees in managing relationships with external auditors after SOX. Managerial Auditing Journal. 2008;24(4):368–397.

Aldamen H, Hollindale J, Ziegelmayer JL. Female audit committee members and their influence on audit fees. Accounting & Finance. 2018;58:57–89.

Bratten B, Causholli M, Sulcaj V. Overseeing the external audit function: Evidence from audit committees’ reported activities; 2019. Available:https://ssrn.com/abstract=3314334

Lee HY, Mande V. The relationship of audit committee characteristics with endogenously determined audit and non-audit fees. Quarterly Journal of Business and Economics. 2005;44(3/4):93-112.

Husnin A, Anuar N, Salin, ASAP. Corporate governance structure and its relationship with audit fee-evidence from malaysian public listed companies. Asian Social Science. 2013;9(15):305-317.

Norziaton IK, Devi SS, Meng CY. Audit committee and audit fees in Malaysia: The moderating role of political connection. Journal of Management Research. 2015;7(2):530-547.

Broye G. Honorairesd’ audited comitésd’ audit: Le cas de la France. Comptabilité Contrôle Audit. 2009;15(1):199-225.

Mustafa ST, Youssef NB. Audit committee financial expertise and misappropriation of assets. Managerial Auditing Journal. 2010;25(3):208-225.

Abbott LJ, Parker S, Peters G, Raghunandan K. An empirical investigation of audit fees, non-audit fees and audit committees. Contemporary Accounting Research. 2003b;20(2):215–234.

Karim K, Robin A, Suh SH. Board structure and audit committee monitoring: Effects of audit committee monitoring incentives and board entrenchment on audit fees. Journal of Accounting, Auditing & Finance. 2015;1–28. DOI: 10.1177/0148558X15583412

Johl S, Subramanian N, Zain M. Audit committee and CEO ethnicity and audit fees: Some Malaysian evidence. The International Journal of Accounting. 2012; 47:302-332.

Nurul Azlin A, Omar S, Zakaria NB, Md Yusof M. Audit committee attributes on audit fees: The impact of Malaysian Code of Corporate Governance (MCCG) 2007. Journal of Modern Accounting and Auditing, 2013;9(11):1442-1453.

Kee HW. The impact of audit committee on audit fees in Malaysian public-listed companies. Malaysian Accounting Review. 2017;14(2):29-53.

Al-Najjar B. Corporate governance and audit features: SMEs evidence. Journal of Accounting, Auditing & Finance. 2018;13(3):17-53.

Mustafa AS, Che-Ahmad A, Chandren S. Board diversity, audit committee characteristics and audit quality: The moderating role of control-ownership wedge. Business and Economic Horizons. 2018;14(3):587-614.

Farooq MU, Kazim I, Usman M, Latif I. Corporate governance and audit fees: Evidence from a developing country. Pakistan Journal of Commerce and Social Sciences. 2018;12(1):94 – 110.

Asiriuwa O, Aronmwan EJ, Uwuigbe U, Uwuigbe OR. Audit committee attributes and audit quality: A benchmark analysis. Business: Theory and Practice. 2018; 19:37–48.

Thiruvadi S, Huang HW. Audit committee gender differences and earnings management. Gender in Management: An International Journal. 2011;26:483- 498.

Gul FA, Hutchinson M, Lai KM. Gender-diverse boards and properties of analyst earnings forecasts. Accounting Horizons. 2013;27(3):511–538.

Burgess Z, Tharenou P. Women board directors: Characteristics of the few. Journal of Business Ethics. 2002;21:39- 49.

Adams R, Ferreira D. Women in the boardroom and their impact on governance and performance. Journal of Financial Economics. 2009;94(2):291– 309.

Ittonen K, Peni E. Auditor’s gender and audit fees. Journal of Accounting Research. 2010;22:1-33.

Schubert R. Analyzing and managing risks – on the importance of gender difference in risk attitudes. Managerial Finance. 2006; 32;706–715.

Ittonen K, Miettinen J, Vähämaa S. Does female representation on audit committees affect audit fees? Quarterly Journal of Finance and Accounting. 2010;49:113-139.

Xiang R, Qin M, Peterson CA. Gender diversity of audit committees and audit fees: evidence from chinese listed companies. Asian Journal of Finance & Accounting. 2015;7(2):239-254.

Sultana N, Singh H, Rahman A. Experience of audit committee members and audit quality. European Accounting Review; 2019.

DOI: 10.1080/09638180.2019.1569543

Hassan Y, Naser K. Determinants of audit fees: Evidence from an emerging economy. International Business Research. 2013;6(8):13-25.

Urhoghide RO, Izedonmi OI. An empirical investigation of audit fee determinants in Nigeria. International Journal of Business and Social Research. 2015;5(8):48-58.

Samsuri ASB, Arifin TRBT. Determinants of Audit Fees: A ConceptualView of Audit Quality Characteristics.International Journal of Advanced Scientific Research and Management.2018;3(5):110-116.

Nekhili M, Gull AA, Chtioui T, Radhouane, I. Gender-diverse boards and audit fees: What difference does gender quota legislation make? Journal of Business and Financial Accounting. 2019;2(1):1– 48. DOI: 10.1111/jbfa.12409

Wooldridge JM. Introductory econometrics: A modern approach. 5th Edition. Singapore: South-Western Cengage Learning; 2013.