TABLE OF CONTENTS
CHAPTER ONE
INTRODUCTION
1.1 Background to the study
1.2 Statement of the research problem
1.3 Research Questions
1.4 Objectives of the Study
1.5 Statements of Hypotheses
1.6 Scope of the study
1.7 Significant of the study
CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
2.2 Conceptualization
2.2.1 Concept of Female Audit Committee Characteristics
2.2.2 Concept of Audit fees
2.3 Review of Empirical Studies on the effect of Female Audit Committee characteristics on Audit Fees
2.4 Theoretical Framework
2.4.1 Agency Theory
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
3.2 Research Design
3.3 Population and sample size of the Study
3.4 Sources and Methods of Data Collection
3.5 Technique of Data Analysis
3.6 Variable Measurement and model specification
3.6.1 Variable Measurement
3.6.2 Model Specification
CHAPTER FOUR
RESULT PRESENTATION AND ANALYSIS
4.1 Introduction
4.2 Descriptive Statistics
4.3 Correlation Analysis
4.4 Robustness Tests
4.4.1 Normality Tests
4.4.2 Hausman Test
4.5 Presentation and Discussion of Regression Results
4.6 Test of Hypotheses
4.7 Policy implications
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Summary
5.2 Conclusion
5.3 Recommendation
5.4 Limitations of the Study
5.5 Areas for Further Research
REFERENCES
APPENDIX 1:
APPENDIX 2:
ABSTRACT
The study examined the effect of female audit committee characteristics on audit fees of listed consumer goods sector in Nigeria through the period 2015 to 2020. A total of ten firms out of the twenty-eight consumer goods on the floor of the Nigerian stock exchange were studied. Secondary data generated from the annual reports and accounts of the sampled firms was used as well as data obtained from the Nigerian stock exchange fact book. The study used female audit committee size, female audit committee diversity, female audit committee composition and female audit committee independence to proxy the independent variable( female audit committee characteristics) while audit fees was used as the dependent variables. The collected data were analyzed using descriptive statistics, correlation analysis, and ordinary least square regression analyses with the aid of STATA. Findings from the study through the use of regression analysis showed that female audit committee size has no significant effect on audit fees of listed consumer goods firms in Nigeria; female audit committee diversity has significant effect on audit fees of listed consumer goods firms in Nigeria; female audit committee share composition has significant effect on audit fees of listed consumer goods firms in Nigeria; and female audit committee share independence has significant effect on audit fees of listed consumer goods firms in Nigeria. It is recommended that audit committee of consumer goods firms listed on the Nigeria stock exchange should integrate more female members since it is found in the study that, female audit committee characteristics member have a significant impact in determining the audit fees on listed consumer goods firms.
CHAPTER ONE
INTRODUCTION
1.1 Background to the study
Audit fee determination has become a fundamental area of audit research in recent times; especially following after the classical cases of audit failure experiences in Enron and other corporations (Ghosh, 2019). The disturbing dimension resulting from ex-post analysis and discourses of these cases of corporate failure is that often times the client had been given a “clear bill of health” and an unqualified auditor’s opinion by the auditor. This therefore suggests that there had been incentives for the maintenance of an ongoing relationship between auditor and client and the auditor independence as well as audit quality had to become the opportunity cost for the survival of the interest of both clients and the auditor (Ahmed & Che-Ahmad, 2016). The search for explanations for the auditor’s performance, the level of auditor independence and the audit quality has seen audit fee evolving as a critical factor and this is well documented in the literature (Mawardi & Lanjarsih, 2020). Audit fee is an important issue and has a significant effect on auditor’s performance, their independence and more particularly audit failures. Thus, audit fee research may be seen as a subset of the general research areas concerned with issues of audit fee determination, auditor independence and audit quality. Audit fee is concerned with the determination of remuneration for audit services that relates directly and primarily to the audit function. Succinctly put, it deals with the determination of audit remuneration from the early work on the pricing of audit services to understanding the basic economics of fee determination (Ittonen et al., 2010).
The structure and effectiveness of the board of directors and its subcommittees is perhaps one of the most recognized forms of corporate governance (Nehme & Jizi, 2018). In particular, the audit committee, viewed by many as the most important board subcommittee (Ghosh, 2019), has wide-ranging authority over the financial accountability and reporting process. It appoints, compensates and oversees the work and independence of the external auditor. Furthermore, the audit committee reviews the general-purpose financial reports, provides oversight of the internal control and risk management processes and pre-approves all auditing and non-auditing services (Riswandi et al., 2021). Certain characteristics, such as independence, expertise and accounting education, are critical to the audit committee’s effectiveness (Salehi & Noman, 2019). However, more recently, gender diversity on boards and committees has gained recognition as one of the factors that increases effectiveness. Female directors on boards can have influence over the level of risk aversion, conservatism when making decisions and the monitoring of management (Mawardi & Lanjarsih, 2020). In fact, participation of female directors in subcommittees, such as the audit committee, is not merely a gender equality issue, perse, but a governance issue that requires thorough consideration.
Consumer goods firms are those companies that deal mainly for the purpose of producing commodities that are ready to be used. The goods involve any tangible product manufactured and subsequently purchased to satisfy immediate needs and wants. They are bought according to the perceived needs of the consumers. In some cases, the consumer goods embrace the services depending on the type of satisfaction expected. Owing to the importance of the consumer goods firms to the economy of Nigeria and the allegations of manipulative tendencies labelled against the industrial goods firms, it is imperative to examine the impact of female audit characteristics on audit fees of consumer goods firms. This study is therefore motivated by the fact that researches in this area which are mostly foreign based documented inconsistent and mixed findings due largely to jurisdictional and sectoral differences. The inconclusiveness of findings has provided incentive for further research effort. In addition, the fact that the consumer goods firms in Nigeria have undergone a number of reforms, coupled with death of local empirical studies on the association between female audit characteristics and audit fees of the sector, make a study that will enable better understanding of the nature and extent of the association more desirable. In line with the above backdrop, the study examines the impact of female audit committee on audit fees of listed consumer goods firms in Nigeria.
1.2 Statement of the research problem
Prior literature provides evidence to support the relationship between female representation on boards of directors and firm-specific variables such as value (Ivanova & Prencipe, 2020), stock returns (Redor, 2016), earnings management (Dakata et al., 2016), earnings quality (Asiriuwa et al., 2018), financial restatements (Onatuyeh & Ukolobi, 2020) and continuous disclosure compliance (Baccouche et al., 2013). Female directors exercise better monitoring of management (Shakhatreh & Alsmadi, 2021), and the likelihood of corporate failure is reduced when female directors sit on boards (Musa et al., 2016). Firms with female CEOs report more conservative earnings (Ibadin L. Ayemere, 2016) and are more conservative in estimating discretionary accruals (Huang et al., 2011).
Over the past few years, the relationship between audit committee characteristics and audit fees has been examined in Ariningrum & Diyanty, (2017), Kamarudin et al., (2014), Saidu & Aifuwa, (2020), and Zubairu, (2016). Consistent with demand-side argumentation, the findings reported in previous studies suggest that audit fees are positively related to audit committee size, expertise, independence, and meeting activity. Given that recent legal reforms impose strict requirements on the composition of the audit committee and emphasize the committee’s monitoring responsibilities in ensuring the integrity of the financial reporting process (Mclaughlin et al., 2021), it is important to consider the potential effects of gender diversity on the functioning and effectiveness of audit committees. To the best of our knowledge, this study is the first attempt to address the role female audit committee characteristics on audit fees determination of listed consumer goods firms in Nigeria. Thus, by focusing on the association between female audit committee representation and audit fees, this paper provides novel insights into empirical audit pricing literature as determined by female representation in the audit committee. The study attempt to assess the determinants of audit fees of listed consumer firms in Nigeria in order to provide evidence on what effect the female audit committee has on the audit fees determination of consumer goods firms which have being neglected by most researchers in Nigeria.
1.3 Research Questions
The research questions to be answered by the study are:
- What effect does female audit committee size has on audit fees of listed consumer goods firms in Nigeria?
- What effect of does female audit committee diversity has on audit fees of listed consumer goods firms in Nigeria?
- What effect of does female audit committee composition has on audit fees of listed consumer goods firms in Nigeria?
- What effect of does female audit committee independence has on audit fees of listed consumer goods firms in Nigeria?
1.4 Objectives of the Study
The main objective of the study is to investigate the effect of female audit committee characteristics on audit fees of listed consumer goods sector in Nigeria while the specific objectives include:
- To examine the effect of female audit committee size on the audit fees of listed consumer goods firms in Nigeria.
- To examine the effect of audit committee diversity on the audit fees of listed consumer goods firms in Nigeria.
- To examine the effect of female audit committee composition on the audit fees of listed consumer goods firms in Nigeria.
- To examine the effect of female audit committee independence on the audit fees of listed consumer goods firms in Nigeria
1.5 Statements of Hypotheses
In line with the objectives of the study, four hypotheses were formulated as follow:
Ho1: female audit committee size has no significant effect on audit fees of listed consumer goods firms in Nigeria.
Ho2 female audit committee diversity has no significant effect on audit fees of listed consumer goods firms in Nigeria.
Ho3: female audit committee composition has no significant effect on audit fees of listed consumer goods firms in Nigeria.
Ho4: female audit committee independence has no significant effect on audit fees of listed consumer goods firms in Nigeria.
1.6 Scope of the study
The study examined the effect of female audit committee characteristics on audit fees of listed consumer goods sector in Nigeria. The study covers the period of 6 years from 2015-2020. The period of the study is considered adequate because it is an analysis of association between the dependent and independent variables over the relatively long period that cover two tenure of the directors within the same accounting regime in Nigeria. The study chooses consumer goods companies as domain of the study because of increasing demand of accounting users such as shareholders, prospective and potential investors, government, foreigners and other stakeholders of the information contained in the financial statement and challenges they face in meeting up with the demand of shareholders, prospective and potential investors. The study covers 10 consumer goods companies listed on the Nigerian Stock Exchange that have complete financial records for the period of the study. The proxies to independent variables (female audit committee characteristics) of the study are female audit committee characteristics, female committee size, female audit committee composition and female audit committee independence. The dependent variable is audit fees of the listed consumer goods firms in the Nigeria.
1.7 Significant of the study
This study titled female audit committee characteristics and audit fees will contribute immensely to the existing literature. Even though there are lots of literature on the audit committee characteristics and audit fees around the globe, there is limited evidence from prior literature that empirically investigates the relationship between female audit committee and audit fees of Listed consumers good firms in Nigeria. This will therefore serve as a reference for further researchers in this area, by critically looking at the empirical finding thereby discussing the implication from the Nigerian perspective.
Conducting this study has become necessary as it will enhance auding quality which has continued to be relevant to stakeholders of all firms in Nigeria. This is significant in the management of consumer goods firms in appointing auditors who are independent and have the ability of pointing out signal of corporate scandals in firms.
Finally, the study is of immense value to the relevant stakeholders and the outcome of the research will assist the corporate entities of the consumer goods firms in Nigeria to know whether or not female audit committee impact on Audit fees which will guide them in taking relevant investment decision.
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