The Effect of Female Audit Committee Characteristics on Audit Fees of Listed Consumer Goods Sector in Nigeria

ABSTRACT

This study investigates the effect of female audit committee characteristics on audit fees among listed consumer goods firms in Nigeria between 2015 and 2020. Ten firms were selected from twenty-eight listed consumer goods companies on the Nigerian Stock Exchange. Secondary data were obtained from annual reports and the Nigerian Stock Exchange factbook.

The study used female audit committee size, diversity, composition, and independence as proxies for the independent variable, while audit fees served as the dependent variable. The data were analyzed using descriptive statistics, correlation analysis, and Ordinary Least Squares (OLS) regression with STATA software.

Findings revealed that female audit committee size has no significant effect on audit fees. However, female audit committee diversity, composition, and independence significantly influence audit fees in listed consumer goods firms. The study recommends that more female members should be integrated into audit committees since female participation positively affects audit fee determination and enhances governance transparency.

CHAPTER ONE

1.1 Background to the Study

Audit fee determination has become an important topic in accounting and corporate governance research. The issue gained attention following major audit failures such as Enron and other corporate scandals (Ghosh, 2019). These events revealed that many firms received clean audit opinions shortly before collapsing, raising concerns about auditor independence and integrity.

Auditors sometimes compromise independence due to close relationships with clients, leading to questions about audit quality (Ahmed & Che-Ahmad, 2016). Consequently, researchers have focused on understanding the link between audit fees, auditor performance, and audit quality (Mawardi & Lanjarsih, 2020). Audit fees represent the remuneration paid for audit services and play a crucial role in determining auditor independence and performance (Ittonen et al., 2010).

Corporate governance structures, especially board committees, also influence audit outcomes. Among these committees, the audit committee is often considered the most important because it oversees financial reporting, internal control, and auditor independence (Nehme & Jizi, 2018; Ghosh, 2019). The committee ensures transparency by reviewing financial reports, approving audit services, and monitoring internal control systems (Riswandi et al., 2021).

Recent studies have highlighted gender diversity as an emerging governance factor that affects committee performance (Salehi & Noman, 2019). Female directors are associated with stronger risk aversion, ethical sensitivity, and conservative decision-making (Mawardi & Lanjarsih, 2020). Therefore, the inclusion of women on audit committees may influence audit fee determination due to their emphasis on thorough monitoring and accountability.

Consumer goods firms play a vital role in Nigeria’s economy by producing goods for everyday consumption. Due to their importance, transparency in their financial reporting is critical. However, concerns about manipulation and inconsistent governance practices persist. As a result, examining how female audit committee characteristics affect audit fees in this sector becomes essential.

Previous studies have reported mixed findings across different countries, often due to variations in governance structures and cultural norms. Therefore, this study focuses on Nigerian consumer goods firms to provide local evidence on how female participation in audit committees influences audit fees.

1.2 Statement of the Problem

Prior studies have linked female representation on corporate boards to several firm outcomes, including firm value (Ivanova & Prencipe, 2020), stock returns (Redor, 2016), earnings management (Dakata et al., 2016), and financial reporting quality (Asiriuwa et al., 2018). Female directors enhance monitoring and reduce the likelihood of corporate failure (Musa et al., 2016).

Although several studies have examined audit committee characteristics and audit fees (Kamarudin et al., 2014; Saidu & Aifuwa, 2020), limited attention has been paid to the gender composition of audit committees in Nigeria. With growing attention on diversity, it is important to assess whether female participation influences the pricing of audit services.

Furthermore, regulatory reforms have emphasized gender inclusiveness and independence in governance structures. Yet, empirical studies in Nigeria rarely explore how these dynamics affect audit fees in consumer goods firms. This study, therefore, seeks to fill that gap by examining how female audit committee characteristics—size, diversity, composition, and independence—affect audit fees among listed consumer goods firms in Nigeria.

1.3 Research Questions

1. What effect does female audit committee size have on audit fees of listed consumer goods firms in Nigeria?

2. How does female audit committee diversity affect audit fees of listed consumer goods firms in Nigeria?

3. What is the effect of female audit committee composition on audit fees of listed consumer goods firms in Nigeria?

4. How does female audit committee independence affect audit fees of listed consumer goods firms in Nigeria?

1.4 Objectives of the Study

The main objective of this study is to examine the effect of female audit committee characteristics on audit fees of listed consumer goods firms in Nigeria. The specific objectives are to:

1. Evaluate the effect of female audit committee size on audit fees.

2. Assess the impact of female audit committee diversity on audit fees.

3. Determine the effect of female audit committee composition on audit fees.

4. Examine the effect of female audit committee independence on audit fees.

1.5 Statement of Hypotheses

In line with the study objectives, the following null hypotheses were formulated:

• H₀₁: Female audit committee size has no significant effect on audit fees of listed consumer goods firms in Nigeria.

• H₀₂: Female audit committee diversity has no significant effect on audit fees of listed consumer goods firms in Nigeria.

• H₀₃: Female audit committee composition has no significant effect on audit fees of listed consumer goods firms in Nigeria.

• H₀₄: Female audit committee independence has no significant effect on audit fees of listed consumer goods firms in Nigeria.

1.6 Scope of the Study

This study focuses on listed consumer goods firms in Nigeria between 2015 and 2020. The six-year period provides adequate data for assessing the relationship between female audit committee characteristics and audit fees. Ten firms with complete financial records were selected for analysis.

The independent variable—female audit committee characteristics—was measured through size, diversity, composition, and independence. The dependent variable was audit fees, obtained from annual financial statements. The study concentrates on consumer goods firms due to their economic importance and the increasing demand for transparency among stakeholders.

1.7 Significance of the Study

This study contributes to the growing literature on corporate governance, gender diversity, and audit fee determination. It provides empirical evidence from Nigeria, where limited research has explored how female audit committee representation affects audit pricing.

The findings will benefit corporate regulators by highlighting the role of gender inclusiveness in promoting transparent financial reporting. For firm management, the study underscores the need to strengthen audit committees with qualified female members to improve oversight quality.

Researchers and academics will also find the study valuable as a reference point for further investigations into gender diversity and audit committee effectiveness in emerging markets. Lastly, investors and policymakers will gain insights into how gender representation influences the integrity and cost of external audits in Nigeria’s consumer goods sector.