Audit Quality Attributes and Financial Performance of Listed Firms in Nigeria

Abstract

This study assesses the impact of audit quality attributes (audit fee, audit firm rotation, audit firm duration, and auditor status) on the financial performance (Earnings Before Interests and Taxes) of publicly listed firms in Nigeria. Fifty manufacturing companies listed on the Nigerian Exchange Group constitute the population of this study. Purposive sampling was employed to choose 30 businesses from the population. This study relied on secondary data culled from the annual reports and accounts of the thirty companies across a seven-year period, from 2015 to 2021. Hausman and the Breusch-Pagan Lagrange Multiplier Test were used to determine the suitability of Panel computed Generalised Least Squares (PGLS) to estimate the regression parameters for evaluating the hypotheses. The result revealed that a positive correlation existed between audit fee and the Earnings Before Interest and Taxes (EBIT) margin of Nigerian listed corporations (p-value = 0.0021). Earnings before interest and taxes margin increases when audit firms are switched, however the effect is not statistically significant (p-value = 0.9360). On the other hand, it was discovered that the profits before interest margin of the listed companies in Nigeria is significantly impacted negatively by the tenure of their audit company (p-value = 0.0393). Last but not least, there is a positive but non-statistically significant relationship between auditor status and the EBIT margin. The study recommends that firms should prioritise engaging auditors with expertise and reputation for quality in order to enhance the credibility of, and confidence in, the financial statement which will ultimately improve financial performance.