Title: Audit committee and financial reporting quality: the mediating effect of audit price in Nigeria

Authors: Hussaini Bala; Noor Afza Amran; Hasnah Shaari

Addresses: Department of Accounting, Kaduna State University, Nigeria ' Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Kedah, Malaysia ' Tunku Puteri Intan Safinaz School of Accountancy, Universiti Utara Malaysia, Kedah, Malaysia

Abstract: This study examines the mediating effect of audit price on the link between the audit committee and financial reporting quality. The model was developed based on a complementary hypothesis and employs a panel dataset comprising 440 firm-year observations. We found that a larger audit committee comprising directors and shareholders is more likely to reduce earnings manipulation in the form of artificial smoothing and managers' discretion on earnings. The study also establishes that larger audit committee size is linked to an increase in audit price. Interestingly, we found that an increase in the price of auditing services minimises the likelihood of earnings manipulation. Also the audit price partially and significantly mediates the link between the audit committee and financial reporting quality. This study also informs regulators and policy makers of the importance of audit price in limiting earnings manipulation and boosting audit quality, which, in turn, enhances financial reporting quality.

Keywords: audit committee; audit price; income smoothing; financial reporting quality; Nigeria.

DOI: 10.1504/AAJFA.2021.113554

Afro-Asian Journal of Finance and Accounting, 2021 Vol.11 No.2, pp.167 - 197

Received: 27 Nov 2018
Accepted: 10 Sep 2019
Published online: 11 Mar 2021 *

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