The moderating effect of audit quality on the relationship between audit committee characteristics and fair value accounting disclosure of listed insurance firms in Nigeria

Abstract

This study investigates the effect of audit quality on the relationship between audit committee characteristics and fair value disclosure among Nigerian listed insurance firms. The findings indicate that audit committee size and meeting frequency do not have a statistically significant impact on fair value disclosure. This suggests that structural attributes alone are insufficient
to enhance disclosure practices, thereby questioning the effectiveness of relying solely on formal governance structures. In contrast, audit committee financial expertise is found to have a positive and statistically significant relationship with fair value disclosure. This result underscores the critical role of financial competence in strengthening financial reporting quality and aligns with the view that expertise-based governance mechanisms are more effective than purely structural arrangements. The study further reveals that audit quality plays a significant moderating role in this relationship. Specifically, audit quality strengthens the
positive association between audit committee financial expertise and fair value disclosure. This finding highlights the complementary interaction between internal governance mechanisms and external audit assurance, suggesting that high-quality audits enhance the capacity of financially knowledgeable audit committees to promote transparency and reliability in financial reporting. Collectively, these findings contribute to the literature on fair value accounting under IFRS 13 by providing empirical evidence from a developing economy context. The study also extends corporate governance research by demonstrating that the
effectiveness of audit committees depends more on members’ expertise than on structural characteristics such as size or meeting frequency. Furthermore, by incorporating audit quality as a moderating variable, the study offers a more nuanced understanding of how governance and audit mechanisms interact to influence disclosure outcomes. This contributes methodologically to prior studies that have largely examined these factors in isolation. From a practical perspective, the findings suggest that policymakers and firms should prioritize the appointment of audit committee members with strong financial and accounting expertise. In
addition, maintaining high audit quality supported by adequate audit fees is essential for enhancing the effectiveness of governance mechanisms. These measures are expected to improve compliance with fair value disclosure requirements and strengthen overall financial reporting transparency.