Fair value accounting and financial reporting quality of listed consumer goods firms in Nigeria: moderating role of audit committee

The study’s relevance lies in testing the effectiveness and efficiency of Nigerian audit committees in mitigating investors' perceptions of estimation errors and bias, which are inherent in fair value accounting. The purpose of the study was to examine the moderating effects of audit committees on the relationship between fair value accounting and the financial reporting quality of listed consumer goods firms in Nigeria. To achieve the objective, both accounting and market quality measures were adopted, including earnings management (discretionary accruals). A correlational research design was employed in a sample of 17 firms from 2012 to 2022. Structural equation modeling was used in the data analysis, and the study found that Level 1 fair value assets have a significant negative impact on financial reporting quality, while Level 3 fair value assets have an insignificant negative effect. The study, on the other hand, found that Level 2 fair value assets and Level 1 fair value liabilities have an insignificant positive impact on financial reporting quality. The findings also revealed that Level 3 fair value assets and Level 2 fair value liabilities have a significant positive impact on financial reporting quality. However, the findings indicated that the audit committee attributes index has a significant moderating effect on the relationship between fair value accounting and the financial reporting quality of listed consumer goods firms in Nigeria. The findings of the study are robust to the potential confounding effect of firm characteristics (firm size and firm age). The study contributed to the debate on the usefulness of fair value accounting by providing policymakers and standard setters with updated empirical evidence originating from a non-Western setting about the post-implementation consequences of fair value accounting adoption.