Abstract:
This study examines the effect of audit committee characteristics on real activity
manipulation of listed manufacturing firms in Nigeria. The data were gathered from
the annual financial reports of sampled firms for period of five years (2010–2014).
The sample size of the study is 36 listed manufacturing firms. The study employed
longitudinal panel, multiple regressions for the purpose of data analysis, using panel
data to examine the role of corporate governance (audit committee attributes) on real
activities manipulation practices. The model applied is composed of a single
dependent variable; real activity manipulation and one explanatory variable (audit
committee) with four proxies - audit committee independence, the number of
meetings, financial literacy and audit committee size. The results reveal that, the
independent audit committee has found to be effective in restraining real activities
manipulation practices by the management in preparing financial statement. However,
the other audit committee attributes like audit committee size, audit committee
literacy and audit committee meetings were found to be in-significant in deterring real
activities manipulation practice of listed manufacturing firms in Nigeria. The Nigerian
Securities and Exchange Commission should make it mandatory that board should
increase the proportion of the independent audit committee members as they appear to
be efficient in constraining manipulative accounting practices by management.
