Audit Committees and Corporate Performance of Selected Companies Quoted in the Nigerian Stock Exchange: a Perception Analysis.

Abstract

The spate of corporate failures in recent times calls for serious examination of their causes and possible solution. Audit committees are statutorily compulsory component of the management of corporate organizations in Nigeria (CAMA 1990) and constitute a credible component of corporate government element. For quite some time now, audit committees have been instituted to add teeth to corporate governance in publicly quoted companies. In spite of this, corporate failures are still rampant. It becomes necessary to ask: how significant is the contribution of the audit committees to corporate performance of quoted companies in the Nigerian Stock Exchange. This paper therefore evaluates the relevance of the audit committee on corporate performance. It focuses on Non-Financial companies quoted in the Exchange between 2006 and 2010. It regresses the average perceived quality of the audit committees against critical financial ratios of these companies over the years covered. A sample size of 287 was selected using the Taro Yameni formula and the Microsoft Special Package for Social Sciences (SPSS) statistical analysis was adopted to perform the regression analysis. It was discovered that the quality of audit committee rather than its mere existence impacts on the performance of companies through a positive impact on corporate governance of such companies. However, for majority of the companies (more than 80 percent), their audit committees are weakly constituted with majority of the members lacking the necessary qualities of integrity, dedication, a thorough understanding of the business of the company among others. These qualities according to Shamsudden (2003) are the bedrock of or sterling qualities of audit committee membership.

Keywords: Audit Committee, Corporate Governance, Control, Corporate Performance