THE IMPACT OF AUDIT QUALITY ON THE FINANCIAL PERFORMANCE OF LISTED COMPANIES NIGERIA

The major corporate failures and other related collapses which occurred around the globe and in Nigeria have raised fears about the reliability of the financial reporting practices by listed companies in Nigeria. This agitated a number of regulatory and professional institutions to advocate for reforms that will enhance transparency in financial reporting and thus increase performance as well as audit quality. Therefore, this study offers proof on the direct influence of audit quality on the financial performance of listed companies Nigeria. We employ 84 companies listed on the NSE with 756 samples for the period of nine years which is from 2010 to 2018 based on panel data approach. Furthermore, the research used secondary approach to retrieve data from Thompson Reuters DataStream as well as the financial statement of the listed companies. This present study employs multiple regression to examine the model. The results reveal that audit fee shows a positively and insignificant relationship with ROA. This implies that if there is decrease in the amount paid to auditors for audit services, then financial performance of listed companies in Nigeria will increase. Consistent with the agency theory, auditor size displays a significant positive relationship with ROA. This positive figure implies that a percentage increase in firms audited by Big4, then financial performance (ROA) will also increase. Auditor independence is also seen to be positive and statistically significantly related to the ROA. Finally, auditor independence is found to be more powerful than auditor size on the financial performance. The result of this research will assist the management as well as the executives of the listed companies in Nigeria to put more effort on independence of an auditor. The study also propose that the executives should engage the services provided by audit firms whose integrity and character is unquestionable. It will also assist policy makers and relevant authorities in decision making.