Establishing Financial Performance of Firms through Audit Quality in Nigeria

Abstract

This study examined the relationship between audit quality variables and firm performance in Nigeria between the periods of 2012-2021. The specific objective of the study is to examine the relationship between audit quality variables [Audit Independence (AI) and Audit Firm Size (AFS),)] and [firm performance proxy with Return on Assets (ROA)] in Nigeria. The focus is on consumer goods firms listed on the Nigeria Stock Exchange. Due to the difficulty in assessing their annual reports and accounts a sample of 10 firms was drawn out of the 28 consumer goods firms for the study. The data for the study was obtained from the annual reports and accounts of the fifteen (15) firms based on the variables under study and the data was analyzed using descriptive statistics, correlation, panel unit root test, Pedroni Residual Co-integration and multiple regression analysis. Based on the discussion of findings, it revealed that Audit Independence (AI) and Audit Firm Size (AFS)) has a negative significant effect on Return on Assets (ROA) with p-values of -0.0476, and -0.0826. This study concludes based on the findings that audit quality variables have a significant mixed effect on firm performance in Nigeria.  It is recommended that firms should employ audit firms in the provision of non-audit services, such as risk assessment etc. In addition, listed consumer goods firms should make it a habit to adhere to the specified period for audit report.