Corporate Audit Committees and Risk Controlling in Nigeria

Abstract

This study investigates the impact of internal control system of firms in Nigeria on the effectiveness of audit committees with ten (10) firms collected across the manufacturing sector of the Nigerian economy and employing the cross-sectional time-series technique of panel model dichotomized into its short-run analyses and long-run situation fashion and covering the periods 2000-2009. Our findings suggest that, given the short-run condition, none of the features of internal control system of corporate firms really affect the effectiveness of corporate firms in Nigeria while estimates obtained from the long-run situation indicate that board size and management ownership significantly affect the effectiveness of audit committee in Nigeria with board composition, leverage position of firms, profitability and shareholding positively but insignificantly impact (positive influence) on audit committees’ effectiveness. Thereby, the effect of internal control system of firms and audit committees’ effectiveness can be seen as a long-run phenomenon in Nigeria. Stemming from these outcomes, this study proffers sound corporate governance, good governance, stable macroeconomic policies and appropriate audit committee’s composition as necessary policy suggestions.

Key Words: Audit Committee, Control Risks, Panel Model, Nigerian Firms.