Audit Committee Characteristics and Fraudulent Financial Reporting

Prior research has shown that audit committee characteristics influence the incidence of financial statement fraud in both developed and emerging economies. To explore this relationship in a developing region, this study analyzed a sample of 672 firm-year observations from 56 firms listed in East African Community member countries over the period 2012–2023. Logistic regression analysis was employed to test the hypotheses using panel data, and ordinary least squares (OLS) were used to validate the baseline regression results. The findings reveal that both audit committee size and meeting frequency are positively associated with the likelihood of financial statement fraud (FSR). Conversely, audit committee gender diversity and financial expertise are negatively associated with FSR. In other words, greater financial expertise and higher female representation on the audit committee are associated with a reduced likelihood of FSR. These insights may guide regulators in enhancing corporate governance codes, particularly those related to audit committee characteristics. Keyword: Audit committee, financial statements fraud, East Africa