Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.4, No.16, 2013 115 Audit Committees and Corporate Performance of Selected Companies Quoted in the Nigerian Stock Exchange: a Perception Analysis. PROF. U. Modum, Dr. Robinson Onuora Ugwoke, Dr. Edith Ogoegbunam Onyeanu Department of Accountancy Faculty of Business Administration University of Nigeria Enugu Campus. Abstract The spate of corporate failures in recent times calls for serious examination of their causes and possible solution. Audit committees are statutorily compulsory component of the management of corporate organizations in Nigeria (CAMA 1990) and constitute a credible component of corporate government element. For quite some time now, audit committees have been instituted to add teeth to corporate governance in publicly quoted companies. In spite of this, corporate failures are still rampant. It becomes necessary to ask: how significant is the contribution of the audit committees to corporate performance of quoted companies in the Nigerian Stock Exchange. This paper therefore evaluates the relevance of the audit committee on corporate performance. It focuses on Non-Financial companies quoted in the Exchange between 2006 and 2010. It regresses the average perceived quality of the audit committees against critical financial ratios of these companies over the years covered. A sample size of 287 was selected using the Taro Yameni formula and the Microsoft Special Package for Social Sciences (SPSS) statistical analysis was adopted to perform the regression analysis. It was discovered that the quality of audit committee rather than its mere existence impacts on the performance of companies through a positive impact on corporate governance of such companies. However, for majority of the companies (more than 80 percent), their audit committees are weakly constituted with majority of the members lacking the necessary qualities of integrity, dedication, a thorough understanding of the business of the company among others. These qualities according to Shamsudden (2003) are the bedrock of or sterling qualities of audit committee membership. Keywords: Audit Committee, Corporate Governance, Control, Corporate Performance 1.INTRODUCTION The distinct characteristic of ‘divorced management from ownership’ of modern corporations, make stewardship accounting inevitable in company administration and management. Professional managers who (Wikipedia, 2007) are considered more competent than the owners of the corporations and are thus hired to run and manage the affairs of the companies are expected to guarantee transparency accountability and fairness in their duties (Howard, 2000). This is a basic tenet of corporate governance. It is guaranteed by ensuring that various mechanisms are put in place to ensure seamlessness in accommodating corporate goal (ownership goal) and management goal in an enterprise. Tricker (1984) had distinguished management and control in the bid to explain corporate governance by asserting that if management is about running business, then governance in the corporate world is about seeing that companies are run properly. Hence corporate governance is concerned with ways in which all parties interested in the well-being of the firm, in order words the stakeholders, attempt to ensure that managers and other insiders take measures or adopt mechanisms that safeguard the interests of the stakeholders. Separation of duties usually depicted in an ‘organigram’, is not only a feature of good internal control but also an essential ingredient of good corporate governance. The corporate governance structure specifies the distribution of rights and responsibilities among different participants in the firm including spelling out the rules and procedures for making decisions. Hence Wolfenson (1999), Uche (2004) and Akinsulire (2006) all agree that corporate governance provides the structure through which the company’s objectives are set and the strategies, the tactics and the means, of attaining those objectives and monitoring performance defined. Manne (1965) however, set the tone which was later made louder by Alchian and Demetz (1972) and Bonnier and Bruner (1989) to the effect that the Board of Directors (BOD) is the most important and possibly, the greatest beneficiary of all good mechanisms of internal control including corporate governance. However, there are other mechanisms of corporate governance, especially the audit committee, that play vital roles in ensuring smooth and efficient management and administration of companies. After all, according to Williams (2001), all stakeholders responsible for promoting sound corporate governance such as the board, the management, the audit committee and regulators are almost equally challenged by the recent failures in corporate governance in Nigeria and should be compelled to ensure that sound corporate governance exist. According to CAMA 1990, the audit committee is a committee of shareholders and non- executive directors charged with the responsibility of liaising between the external auditors and the BOD on one hand, and between management and the external auditors on the other hand. The inclusion of this committee in the corporate governance mechanism raises the expectations of shareholders and the general public for enhanced