The Effect of Audit Committee Characteristics on Financial Statement Fraud in Listed Nigerian Firms

This study examines the effect of audit committee characteristics on financial statement fraud in companies listed on the Nigerian Exchange Group. Audit committees serve as critical governance gatekeepers responsible for overseeing financial reporting integrity and external audit effectiveness. However, the effectiveness of audit committees in Nigerian listed firms has been questioned, given documented cases of financial statement fraud in companies with formally constituted committees. This study uses an ex-post facto design, drawing on governance and financial data from 20 listed companies that were subject to regulatory sanctions for financial misstatements between 2018 and 2023, compared with a control group of 20 compliant firms. Audit committee characteristics examined include independence, financial expertise, meeting frequency, and committee size. Logistic regression analysis is used to identify characteristics that predict the likelihood of financial statement fraud. Results indicate that audit committee financial expertise and meeting frequency are the strongest predictors of fraud deterrence. Committees comprising more than one-third independent non-executive members with accounting qualifications show significantly lower fraud occurrence. The study concludes that improving the quality of audit committee composition is a high-impact governance intervention for reducing financial statement fraud in Nigerian listed companies. It recommends that the Securities and Exchange Commission mandate minimum financial competency requirements for all audit committee members and enforce stricter independence standards.

Keywords: audit committee, financial statement fraud, corporate governance, Nigerian Exchange Group, board independence.