AUDIT COMMITTEE AND INTEGRITY OF FINANCIAL STATEMENTS: A Preventive Mechanism for Corporate Failure.

Abstract

Corporate governance is a phenomenon that has recently attracted local and foreign interest due to the frequent occurrences of corporate failures experienced by various organizations in both developed and developing nations around the world. Financial statements are the midpoint of this corporate disorder and auditing profession is said to responsible for the disaster. This has brought the question of how efficient is our financial system and the effectiveness of the audit infrastructure. This study investigated the effect of audit committee oversight function on integrity of financial statements as a means preventing organizational failure. The population of this study consisted of 183 public quoted companies in the Nigerian Stock Exchange, 100 medium and large audit firms and 616 investor with about 10% holding in PLC. Data was elicited using structured questionnaires. Hypotheses were confirmed using Z-test. The result shows that there is significant relationship between audit committee activities and integrity of financial statements, which enhances the quality corporate governance and prevents organizational failure. The study recommended that a committed audit committee should be established and members to be appointed should possess analytical skill with strong financial background. The will go a long way to curb the incessant corporate failure in Nigeria.