The Effects of Independent Audit Committee on the Accounting Policy Decisions of Nigerian Firms

Abstract

Purpose: The study examines the effects of the independent audit committee on the accounting policy decisions of firms. Managers use their discretion in accounting decisions against the interests of shareholders. Independent audit committees are relied upon by the shareholders for monitoring. Design/Methodology/Approach: Data were generated from the financial reports of the sampled firms and a model similar to Bowen DuCharme and Shores (1995) and Jackson, Xiaotao and Cecchini (2009) was used to estimate the predictive capacity of the independence audit committee in the process.  Findings: It was found that the firms predominantly decided on income increasing policies but did not find any significant evidence that independence audit committee monitoring is effective on accounting decisions.  Implications/Originality/Value: The firms set up audit committees not because they rely on them for effective monitoring but to fulfil statutory requirement of CAMA 2014, as amended. This conclusion is consistent with the view of Menon and Williams (1994).  This evidence extents the literature of accounting choice in relation to the role of audit process.