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The Relationship between Audit Committee Attributes and Audit Fees of Listed Companies in Nigeria

This paper examines the influence of audit committee (AC) attributes on audit fees (AUF) of 440 firm-year observations of listed companies in Nigeria for five year period (2012 to 2016). A multiple regression was employed in estimating the model using robust standard errors. We explore and improve prior literature of same relations by using additional variables (AC legal experts, AC stock ownership and AC chair independence). The study found that (AC size, AC financial accounting experts, AC legal experts and AC stock ownership) are positively associated with AUF in their quest for greater audit assurance. The study also established that female AC and AC chair independence act as substitute to audit quality which praises that higher internal control will be accredited to lower audit process. The findings and inferences are also consistent with complementary hypothesis of audit quality (payment of high fees in an exchange for better audit efforts. Our result is conclusive and robust for the inclusion of the foregoing AC attributes that were limitedly explored by prior studies in this relationship. Our study provides an insight on the importance of AC legal experts; AC stock ownership and AC chair independence to the current and potential stakeholders who are the direct users of financial reports. The study informs regulators and policy makers the potential influence of these unique AC attributes on auditors’ price which is one of the most crucial drivers of audit quality accredited to lower audit process. Our findings and inferences are also consistent with complementary hypothesis of audit quality (payment of high fees in an exchange for better audit efforts). Our result is conclusive and robust for the inclusion of the foregoing AC attributes that were limitedly explored by prior studies in this relationship. Our study provides an insight on the importance of AC legal experts, AC stock ownership and AC chair independence to the current and potential stakeholders who are the direct users of financial reports. The inferences will enable the investors better recognize the consequences of each variable in augmenting the credibility of financial disclosure which in turn enhance investors’ confidence. This study also informs the regulators by making them better understand the underlying importance of distinct AC attributes in enhancing audit quality which is one of the most pivotal driver of firms’ financial reporting quality. Specifically, these findings provide the regulators and policy makers the potential influence of AC legal experts, AC shareholdings, AC tenure and AC chair independence on auditors’ price which is one of the most crucial drivers of audit quality.