Advanced Journal of Finance and Accounting

Income smoothing is an administrative practice in an organization's annual reports to give the impression of continuous or yearly income. To ensure that the financial statements present a truthful and fair perspective on the company's financial status, it is necessary to guarantee that the financial statements are free of errors. Effective audit committee is essential for ensuring the credibility of reported earnings and that earnings preserve their integrity, for this to happen, members of the audit committee must be competent in financial reporting to effectively question management's estimations and comprehend the accounts that management has prepared for public use. This study appraised the effect of audit committee's effectiveness and income smoothing in listed deposit money banks in Nigeria. The ex-post facto research design was selected to gather information from distinct bank annual audited reports.  Nineteen (19) Deposit Money Banks quoted on the Nigerian Exchange as at December 2021 was the research population. This study used purposive sampling techniques. The sample size consisted of five (5) banks (4 with international authorization and 1 with national authorization), for a period of five years (2017 – 2021). The results of this study suggest that income smoothing by management can only be curbed when audit committee members are financially educated and possess the essential knowledge and abilities to examine and comprehend the financial statements presented by management. The study concludes that audit committee effectiveness has a significant effect on income smoothing of deposit money banks in Nigeria. The study recommends that the minimal number of members on audit committees who have financial competence must be increased. The policymakers should also mandate that the chairperson of the audit committee be someone with extensive experience in financial analysis or a certified public accountant, rather than just one member.