AUDITOR’S INDEPENDENCE AND FINANCIAL REPORTING CREDIBILITY IN THE NIGERIA BANKING SECTOR
Abstract
This study evaluated the relationship between auditors’ independence and financial reporting credibility in the banking sector. An ex-post facto research design was adopted for the study, where 10 banks were used as sample covering a period 2014-2023. Data were obtained from the financial statements of the considered banks and analyzed using regression analysis with the aid of E-View. The results showed that all three null hypotheses were rejected, thus accepting their alternatives namely, audit fees, audit tenure, and firm size have a positive relationship with accrual quality. The study concluded that auditors’ independence has a positive relationship with financial reporting credibility, with recommendations that firms in the banking sector should develop contingency plans for situations where audit fees may need to increase unexpectedly, and that lager audit firms that have more resources, expertise, and experience that will lead to high audit quality should be used to ensure the accuracy and reliability of financial statements.
Keywords:
Auditor’s Independence, Audit Fees, Audit Tenure, Firm Size Reporting Credibility, Accrual QualityDownloads
Published
DOI:
https://doi.org/10.5281/zenodo.15315791Issue
Section
How to Cite
License
Copyright (c) 2025 Erorogha Akpos Yikarebogha (PhD)
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
References
AbdulMalik, S. & Ahmad, A. C. (2016). Audit fees, corporate governance mechanisms, and financial reporting quality in Nigeria. DLSU Business and Economics Review, 26(1), 1–14.
Adeniyi, S. I. & Mieseigba, E. G. (2013). Audit tenure: An assessment of its effects on audit quality in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences. 3(3), 275-283.
Adeyemi, S. B. & Akinniyi, K. O. (2011). Stakeholders’ perception of the independence of statutory auditors in Nigeria. Serbian Journal of Management, 6, 247-267.
Agbaje, A. G., Sadiq, A., Adesoji, O. & Oyindamola, S. A. (2021). Effect of auditors’ independence on financial reporting quality of Nigerian deposit money bank. Financial Internet Quarterly, 17(2), 59-65.
Albesh, H. M. (2017). Factors affecting the independence of external auditors in the auditing profession. International Journal of Management and Commerce Innovations, 4 (2), 680-689.
Aliu, M. M., Okpanachi, J., & Mohammed, N.A. (2018). Auditor’s independence and audit quality: An empirical study. International Accounting and Taxation, Review, 2 (2).
Arens, R., Alvin A., Shailer, G., & Fielder, B. (2011). Auditing, assurance service and ethics. In Australia. 8th Ed. p99. Pearson Australia.
Arthur N., Medhat E. & Shawn, H. (2019). Impact of change in partners on audit quality: Analysis of partner and firm specialization. Journal Australian Accounting Review.
Babatolu, A.T., Aigienohuwa, O. O. & Uniamikogbo, E. (2016). Auditor’s independence and audit quality: A study of selected deposit money banks in Nigeria. SSRN Electronic Journal. International Journal of Finance and Accounting, 5(1), 13-21.
Bahram, S. (2000). Auditing: An international approach -Trans-Atlantic Publications, Inc.
Ball, R., Gerakos, J., Linnainmaa, J., & Nikolaev, V. (2015). Deflating profitability. Journal of Financial Economics 117 (2), 225–248.
Barizah, A. N., Rahim, A. A., & Majdi, A., H. (2005). Factors Influencing Auditor Independence: Malaysian Loan Officers' Perceptions. Managerial Auditing Journal, 20(8), 804-822.
Bassey, E. B., & Omini, E. U. (2020). Auditors’ independence and audit quality in Nigeria. Journal of Critical Reviews 7(17):624-635.
Daferighe, E. E. & Emem, M. G. (2020). Audit Firm Attributes and Financial Reporting Quality of Quoted Manufacturing Firms in Nigeria. International Journal of Economics and Management Studies, 7 (1).
Daniels, B. & Brooker, Q. (2011). The Effects of Audit Firm Rotation on Perceived Auditor Independence and Audit Quality. Research in Accounting Regulation, 23, 78-82.
Defond, M., & Zhang, J. (2014). An investigation of audit quality in Mauritius.
Ebubechukwu, J. O. (2023). Audit independence and financial reporting quality: A Study of Listed Non-Financial Firms in Nigeria. International Journal of Research Publication and Reviews. Journal homepage: www.ijrpr.com ISSN 2582-7421.
Effiok, S. O., Tapang, A. T., & Eton, O. E. (2012). The impact of human capital cost on gross domestic product (GDP) in Nigeria. International Journal of Financial Research, 3(4).
Enofe, A. O., Okunega, C. N., & Ediae, O. O. (2013). Audit Quality and Auditors’ Independence in Nigeria: An Empirical Evaluation. Research Journal of Finance and Accounting, 4(11), 22-28.
Ezeala, G. & Chinedu, F. E. (2023). Treasury Single Account (TSA) and cost of governance: Survey of MDAs in Anambra State. Journal of Governance and Accountability Studies 3 (1), 1-11.
Eyenubo, S. A., Mohamed, M. & Ali, M. (2017). Empirical Analysis of the Financial Reporting Quality of Quoted Firms in Nigeria: Does Audit Committee Size Matter? International Journal of Academic Research in Business and Social Sciences, 7(9), pp. 50-63.
Feleke, B.T. (2017). Auditors’ perception of audit quality in Ethiopia. Addis Ababa University.
Francis, J., LaFond, R., Olsson, P., & Schipper, K. (2005). Market pricing of accruals quality. Journal of Accounting and Economics 39: 295–327, 2018.
Givoly, D., Hayn, C., & Katz, P. S. (2010). Does Public Ownership of Equity Improve earnings Quality? The Accounting Review 85 (1): 195-225.
Gow, I., Larcler, D., & Reiss, P. (2015). Causal Inferences in Accounting Research. London: Stanford University.
Guay, W., Kothari, S. P. & Watts, R. (1996). A market-based evaluation of discretionary accruals models. Journal of Accounting Research, 3(4), 83–105.
Hussain, M. N., & Sobhan, R. (2018). Determinants of audit fees: Evidence from the pharmaceutical and chemical industry of Bangladesh. International Journal of Trend in Scientific Research and Development, 4(1), 814-821.
Huyghe, P. (2017). Perceptions of auditor’s independence in private companies, unpublished Master’s Dissertation, Universiteit Gent, Belgium.
Ikharo, C. O. (2015). The impact of an auditor’s tenure on quality audit report. Research Journal of Finance and Accounting, 7(6), 23.
Jensen, M. C., & Meckling, W. H. (1993). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3 (4), 305-360.
Kabiru, I. D., & Abdullahi, S.R., (2012). An examination of the quality of audited financial statements of money deposit banks in Nigeria. International Journal of Academic Research in Accounting, Finance and Management, 4(1), 145-156.
Kent, P., Routldge, J., & Stewart, J. (2010). Innate and Discretionary Accrual Quality and Corporate Governance. Journal of Accounting and Finance, 50 (1), 171-195.
Kim D., & Yaxuan, Q. (2010). Accrual quality, stock returns, and macroeconomic conditions. The Accounting Review. 85 (3): 937–978.
Lobo, G. J., Paugam, L., Zhang, D., & Casta, J. F. (2012). The effect of joint auditor pair composition on audit quality: Evidence from impairment tests. Contemporary Accounting Research, 34(1), 118-153.
Madakawi, A. (2012). Audit committee characteristics and financial reporting quality: Evidence from Nigerian listed companies (Doctoral dissertation, University Utara Malaysia.
Miharjo, S., & Hartadi, B. (2012). Does Auditor Tenure Reduce Audit Quality? International Journal of Business, 14, pp. 303-315.
Moses, T., Ofurum, C. O., & Egbe, S. (2014). Audit committee characteristics and quality of financial reporting in quoted Nigerian banks. International Journal of Advanced Academic Research, Social and Management Sciences, 2(5), 1-10.
Ndubuisi, A. N., & Ezechukwu, B. O. (2017). Determinants of audit quality: Evidence from Deposit money banks listed on Nigeria stock exchange. International Journal of Academic Research in Accounting, Finance and Management Sciences, 7(2), 117–130.
Novie, S. (2013). Empirical analysis of the auditor independence and audit fees on audit quality. International Journal of Management and Business, 3(3)13-27.
Nwanyanwu, L. A. (2013). Financial Reporting and organizational liquidity in Nigeria: The accounting basis perspective. Research Journal of finance and Accounting, 4 (16), pp. 79-81.
Nwanyanwu, L.A. (2017). Audit quality practices and financial reporting in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences 7 (2), 145-155.
Okezie, S. O. & Egeolu, D. U. (2019). Audit independence and reliability of financial Reports: Empirical evidence from Nigerian banks. IIARD International Journal of Economics and Business Management, 5(3), 43-52.
Okolie, A. O. (2014). Audit quality and earnings response coefficients of quoted companies in Nigeria. Journal of Applied Finance and Banking, 4, 139.
Otuya, S. (2019). Auditors' independence and quality of financial reporting in listed Nigerian manufacturing companies. International Journal of Accounting and Finance, 8(1), 111-128.
Simon, P. (2018). The importance of quality in financial reporting. The Times of Malta.
Smii, T. (2016). The impact of audit quality on earnings management: A case study in Tunisia. Journal of Accounting and Marketing, 5(3).
Stella, O., & Uchenna, E. D. (2019). Audit independence and reliability of financial reports: empirical evidence from Nigerian banks. International Journal of Economics and Business Management. 5(3), 43-52.
Tapang, A. T., Bessong, P. K. & Ujah, P. I. (2015). Management influence and auditor independence in Nigerian Banks. International Journal of Economics, Commerce and Management, 3(4), 1-26.
Wali, S. (2015). The impact of auditors’ independence on audit quality: A Theoretical Approach. International Journal of Scientific and Technology Research, 4(12), 348-352.
Yakubu, R., & Williams, T. (2020). Theoretical approach to auditor independence and audit quality. Corporate Ownership and Control, 17(2), 124-141.
Zayol, P. I., Kukeng, V. & Iortule, M. (2017). Effect of auditor independence on audit quality: A review of literature. International Journal of Business and Management Invention, 6(3), 51-59.
