Effect of Audit Quality on Financial Performance of Deposit Money Banks in Nigeria: Corporate Governance Perspectives

Abstract

This study examined the effects of audit quality on the financial performance of 10 out of 16 Deposit

Money Banks (DMBs) listed on Nigeria Stock Exchange (NSE) for which data were available covering a

period of 10 years (2010-2019). While the specific objectives are to ascertain the effect of Audit Fee

(AUF), Audit Report Lag (ARL) and Audit Committee Diligence (ACM) on the financial performance of

Deposit Money Banks (DMBs) in Nigeria, it applied Return on Assets (ROA) as a measure of financial

performance. The study adopted ex post facto research design, data for the study were collected from

annual reports and accounts of listed DMBs. The study employed multiple regression analysis using SPSS

to test the formulated hypotheses. The result showed Audit Fees (AF) and Audit Reported Lag (ARL)

significantly affect financial performance of DMBs in Nigeria while Audit Committee Diligence (ACM)

has insignificant effect on the financial performance of DMBs in Nigeria. The study recommends that:

DMBs should strive to enhance the efficiency of their financial reporting processes to reduce the need for

extensive audit procedures. Implementing robust internal control systems, automating processes, and

adopting advanced accounting software can streamline financial reporting and potentially lower audit

fee; DMBs should strive to streamline their internal processes and improve the efficiency of the financial

reporting and auditing processes. This includes ensuring timely preparation of financial statements,

prompt resolution of accounting issues, and effective communication with auditors. By reducing

unnecessary delays in the audit process, companies can minimize audit report lag; DMBs should promote

a culture of continuous improvement and learning within audit committees. This can be achieved through

ongoing professional development programs, access to relevant resources and training, and opportunities

for committee members to stay updated on emerging trends and regulatory changes. By continuously

enhancing their knowledge and skills, audit committees can contribute more effectively to financial

performance.