Audit Quality and Financial Performance of Listed Manufacturing Companies in Nigeria
Keywords:
Audit fees, Auditor independence, Audit size, Return on assetsAbstract
The discredit to independence of auditor in carrying out their function has raised doubt in the minds of investors about the reliability of the report given by external auditors. Consequently, the study assessed the effect of audit quality on the performance of listed manufacturing companies in Nigeria.
The study employed ex-post facto research design. Specifically, the study covered 105 quoted manufacturing companies in Nigeria, with data covering 10 years (2013 to 2022), out of which 40 companies were purposively selected. The proxies for audit quality were audit size, auditor’s independence, and audit-fee size; whereas, firm performance was measured by Return on Assets (ROA).
From the results, with a p-value of β>0.000, and 0.263, it revealed that AUDTF is positively and statistically insignificantly related to the ROA while p-value of β>0.000, and 0.263 shows that AUDIN and ROA have a positive and statistically significant relationship. Also, AUDSZ displayed a statistically significant and a positive relationship with the ROA, having a p-value of b>0.014 as well as 0.043, respectively.
The study concluded that auditor independence and auditor size had positive and significant effect on return on asset. In line with the findings, the study recommended that management of firms should pay more audit fees to enhance the financial predominance and audit independence of their firms.
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