Tag Archives: Audit Quality

Effects of Audit Committee Expertise and Meeting on Audit Quality of Listed Consumer-Goods Companies in Nigeria (Published)

The study examines the effects of audit committee expertise and meeting on audit quality of listed consumer-goods companies in Nigeria covering a period of eleven (11) years (2006 – 2016). Longitudinal panel research design was adopted for the study. The population of the study consists of the twenty-three (23) listed consumer-goods companies on the floor of Nigerian Stock Exchange as at 31st December, 2016. The census sample size consists of fifteen (15) companies. Eight (8) companies were filtered out of which five (5) companies were listed outside the period of study and three (3) companies were without complete data. Secondary data from published annual financial statements of the sampled companies in Nigeria were used. Descriptive statistics (mean, standard deviation, minimum and maximum) and inferential statistics (correlation and multiple regression) were used for the study. The results show that audit committee expertise and meeting have positive and non significant effects on audit quality of listed consumer goods companies in Nigeria. The study concludes that audit committee expertise and meeting have no significant effect on audit quality of listed consumer-goods companies in Nigeria.

Keywords: Audit Committee, Audit Quality, Expertise, Meeting, Nigerian Stock Exchange

The Association between Audit Quality and Earnings Management by Listed Firms in Nigeria (Published)

This study examines the association between audit quality and earnings management by listed firms in Nigeria. The study measures audit quality by audit firm size and earnings management by the absolute abnormal discretionary accruals using the modified Jones model. The study was carried out in two parts, the first part is the comparative study using independent sample t-test and the Wilcoxon signed ranked test. The second part is the multivariate analysis where the association between audit quality and earnings management was examined. Based on our analysis, we found that auditor size has restrained earnings management but the decrease is not statistically significant. The implication of this finding is that users should not blindly assume that high audit quality proxy by the big 4 auditor is a symbol of earnings quality.

Keywords: Audit Quality, Earnings Management, Nigeria, auditor size

The Competency and Independency Auditors to Audit Quality at Auditors of Public Accountant in Palembang (Published)

This study aims to test the competency and independency of the Auditor on the Quality Audit Office Public Accountant Auditor Palembang. The study sample as many as 39 registered Public Accountants in Palembang, used multiple regression analysis. The results of calculations using SPSS, showed that:1) R2 of  0.499, illustrates that the quality of the audit, can be explained by the dependent variables amounted to 49.9%, while the remaining 51,1%, can be explained by other factors, which are not included in this study. ;2) Obtained value of F(7.309) Sig(0,000), means that there is a significant influence of dependent variables together to quality audit; 3) there are no significant effect from experience, knowledge, and non audit services on the quality of audit; 4) and there are  significant effect of long relationships with clients, pressure from clients, and review co-auditors on audit quality.


Keywords: Audit Quality, Experience, Knowledge, Non-audit services, long relationships with clients, pressure from clients, review co-auditor

Corporate Governance and Audit Quality in Nigeria: Evidence from the Banking Industry (Published)

This study examined the relationship between corporate governance and the quality of auditor’s report with evidence from the Nigerian Banking Industry. The research design adopted for this study is the ex-post facto as the research relied on historic data. Eleven (11) deposit money banks quoted on the Nigerian Stocks Exchange were sampled. In testing our hypothesis, the correlation analysis was applied to a dataset covering seven (7) years from 2007 to 2014 that is   the post-corporate governance period. Analysis suggests that while board composition has a negative and insignificant relationship with audit quality, separation of the roles of the CEO from that of the chairman of the board, board size, and composition of the audit committee has positive and significant relationship with audit quality. Furthermore, findings also show that ownership concentration has a positive but insignificant relationship with audit quality. Findings  also show that the strength of the positive linear relationship between the separation of the roles of the CEO from that of the chairman of the board and the audit quality is as high as 0.702377 or 70.23% followed by the relationship between board size and audit quality which stood at 0.452896 or 45.28%. However, the   study thus concludes that effective corporate governance arises out of responsible and simultaneous vigilant actions by the managers, the board of Directors, shareholders and auditors. Good financial Reporting from the external auditors is an important building block of corporate governance because the information provided to the shareholders has to be optimal in terms of cost and benefits. The study also recommends that the relationship between management and shareholders have to be characterized by transparency and fairness.

Keywords: Audit Quality, Board Composition, Board size, Corporate Governance, Nigeria

Effect of Audit Fees on Audit Quality: Evidence from Cement Manufacturing Companies in Nigeria. (Published)

This paper aims to examine the effect of audit fees on audit quality in Nigeria using a sample of listed cement companies on the floor of the Nigerian Stock Exchange. In specific terms, the study investigates the relationship between audit fee, audit tenure, client size, leverage ratio and audit quality. Ordinary Least Square Model estimation technique was employed to analyze the relationship between the explanatory variables and the dependent variable. Secondary data derived from the published annual reports of the selected companies for a six year period (2010-2015) was used for the study.  Findings from the study show that audit fee, audit tenure, client size and leverage ratio exhibit a joint significant relationship with audit quality given coefficient of determination (R2) being 0.6006 and a combined p-value of 0.001 and Fcalc=7.14. This implies that the predictive power of the independent variables as used to explain changes in audit quality is about 60%. Audit fee in particular shows a significant positive impact on audit quality with a t and p-values of (4.04 and 0.001) respectively as well as a high positive correlation coefficient of 0.7513 with audit quality. The study recommends that Government through the various professional bodies should develop robust policies that will help improve audit quality in Nigeria.


Keywords: Audit Quality, Audit fee, Audit tenure, Client Size, Leverage Ratio .

Auditor Tenure, Auditor Rotation and Audit Quality: A Review (Published)

The arguments on auditor tenure and rotation revolved around ensuring auditor independence and promoting audit quality. Two hypotheses tend to explain the effect of longer auditor tenure. The auditor independence hypothesis argues that longer tenure decreases audit quality and financial reporting because of the impairment of auditor’s independence while the expertise hypothesis posits that longer tenure improves audit quality through learning. Nevertheless, the auditor tenure be long enough for auditors to bring their competence and expertise into the auditing process and also familiarize with the audited firm and environment. Apart from the few countries where there have mandatory audit rotations, it is still under experimentation in many other countries Moreover, the results of the impact of audit firm/partner rotation on audit quality have been mixed and inconclusive. And specifically, one of the leading advocates for mandatory auditor rotation through the Sarbanes Oxley Act of 2002, the United States, has recently made a U-turn through appropriate amendment to the mandatory rotation of the audit firm in 2013.However, in April,2014 the European Union parliament voted in favour of 2011 proposal to force European companies to hire new auditors after six years with a four year cooling period. Therefore, we conclude that the mixed evidence and the recent regulatory changes on auditor rotation provide opportunities for future studies on auditor tenure, auditor rotation and audit quality.

Keywords: Audit Firm, Audit Partner, Audit Quality, Auditor Independence, Auditor Rotation, Auditor Tenure


This study follows prior studies on cash – based activities manipulations to investigate total levels of cash – based earnings management relative to the association between cash – based earnings management and audit firm size of companies in Nigeria. First, the study measures the normal level of real activities by focusing on three manipulation schemes namely, manipulation of sales, overproduction, and reduction in discretionary expenses. The normal levels of each type of real activities manipulation were measured as the residual from relevant estimation models. The abnormal CFO, abnormal production costs and abnormal discretionary expenses were computed as the difference between the actual values and the normal levels predicted from the respective models while the composite value of the three variables is the estimate for cash – based earnings management. Based on a sample of 342 companies – year observations from the NSE and applying audit firm size as a measure, comprehensive multivariate analyses were conducted on archival data covering 2006 – 2011. The result showed that audit firm size exerts significant negative relationship with cash – based earnings management of quoted companies in Nigeria. It is suggested that companies in Nigeria should improve their earnings quality only through sales growth and cost control strategies and present distinct reports on earnings quality; company auditors should issue Integrated Audit Quality Assurance Reports based on earnings quality assessments statutorily backed by earnings monitoring of companies in Nigeria; while regulatory agencies should issue authoritative codes of best practice in Nigeria

Keywords: Audit Firm Size, Audit Quality, Cash Flow from Operations., Earnings Management, Earnings Quality

Effective Audit Committee, Audit Quality and Earnings Management Before and After Financial Security Law Adoption (Review Completed - Accepted)

This study examines the interaction between the effectiveness of audit committee and external audit functions to mitigate the earnings management in the Tunisian companies before and after financial security law adoption. Using 261 firm-year observations during the period 2001-2009, our results document a substitute effect between the presence of Big four auditor and effective audit committee to reducing the discretionary accruals in the Pre-law n° 2005-96 periods. We also find a link of complementary between the score of effectiveness of audit committee and industry specialist auditor to constrain earnings management. Finally, our findings show a complementary relation between the effectiveness of audit committee and audit tenure, after the passage of law n° 2005-96

Keywords: Accruals, Audit Committee, Audit Quality, Law N° 2005-96