Effect of Audit Quality on Financial Performance of Deposit Money Banks in Nigeria
- Post by: airjournal
- March 10, 2022
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ABSTRACT
This empirical investigation was focused on the effect of audit quality on the financial performance of Deposit Money Banks (DMBs) in Nigeria. The specific objectives are to ascertain the effect of Audit Firm Size (AFS), Audit Fee (AF), and Audit Report Lag (ARL) on Return on Assets (ROA) of Deposit Money Banks (DMBs) in Nigeria. The study covered the period from 2004 to 2019 and utilized secondary sourced data extracted from the annual financial statements of the sampled banks. The research design adopted was ex-post facto design while analytical techniques employed were descriptive statistics and Ordinary Least Squares (OLS) multiple regression estimation mechanisms. Findings uncovered that Audit Firm Size (AFS) and Audit Fee (AF) encourage the value of firm performance while Audit Report Lag (ARL) exerts a negative influence on the performance index of deposit money banks in Nigeria. As provided by the empirical result, only the effect of Audit Fee (AF) was statistically insignificant (p>0.05); the effects of Audit Firm Size (AFS) and Audit Report Lag (ARL) were statistically significant (p<0.05). The implication of the findings is that without adequate effort to properly monitor the financial performance of Deposit Money Banks (DMBs) in Nigeria, it will continue to deviate from reporting correct earnings figures by presenting earnings figures that appear beautiful but are not true; hence investors and other stakeholders are deceived. The Auditor standing expertise notwithstanding, an overly long association between the Auditor and his client may constitute a threat to independence and hence audit quality as personal ties and familiarity may develop between the parties. This will lead to less vigilance and an obliging attitude of the Auditor towards the top Managers of the company. Apart from the threat to independence and audit quality, the audit engagement may become routine over time, resulting in the devotion of less effort to identifying the weaknesses of internal control and risk sources.
Keywords: Performance, Deposit Money Banks, Ordinary Least Squares
Authorship
Agana, John O. PhD; Obasi, Ama I.; PhD; Ojonta, Austin B.; Beke, Cyrilson C. and Nweze Kizito | Full PDF