Internal Audit Function and Financial Statement of Insurance Companies in Nigeria

Abstract:

The survival of any firm is predicated on the efficient functioning of the internal audit constituted by management for safeguarding of the company’s assets. It has been argued that several instances of doctored financial statements of quoted firms in Nigeria abound leading to scandals with dire consequences on investors’ confidence. The study examines the relationship existing between internal audit function and the financial performance of insurance companies in Nigeria. The study made a return on assets as a function of audit committee size, audit committee independence, audit committee financial expertise and firm size. The data culled from the financial statements of selected firms, National Insurance Commission Facts Books and the Nigerian Stock Exchange covers the period 2011-2020. Multiple regression techniques were used to explore the contemporaneous dynamics. The study finds evidence of a significant positive impact of audit committee size, audit committee independence and audit committee financial expertise on financial performance, contrary to the significant negative impact of firm size. Therefore, the paper recommended that the various elements of audit committee characteristics, which include audit committee size, independence, and financial expertise, should be strengthened to enhance financial performance in the insurance sector.