RELATIONSHIPS BETWEEN AUDITOR QUALITY, AUDIT COMMITTEE TENURE AND FINANCIAL REPORTING QUALITY OF LISTED FIRMS IN NIGERIA

Abstract

This study empirically explored the relationships between auditor quality, audit committee tenure and financial reporting quality of listed firms in Nigeria. The sub-objectives were to determine the relationship between audit quality and financial reporting quality of quoted manufacturing firms in Nigeria, determine the relationship between audit committee tenure and financial reporting quality of quoted manufacturing firms in Nigeria. The population of study covered all firms listed on the Nigerian Stock Exchange. Meanwhile, the sample consists of ten selected quoted firms in the various sectors of the Nigerian Stock Exchange (NSE) between 2000 and 2017. The purposive techniques were used in this study. These firms were purposively selected based on the criteria that they have their annual reports in the domain of the NSE for the period of study. The analysis included descriptive statistics and correlational analysis which demonstrated the association between auditor quality, audit committee tenure and financial reporting quality of listed firms in Nigeria.  The results of the study showed that on average, there is a negative relationship between audit committee tenure and firms’ financial reporting quality (r=0.07009) and a positive relationship between auditor quality and firms’ financial reporting quality (r=0.270694). However, with both (auditor quality and audit committee tenure) being present in the system, the financial reporting quality declines (r=0. 04916). In other words, an adverse (negative) relationship was obtained. Based on these findings, the study recommended that the board of the new regulator should exercise stronger ownership and oversight of the regulator’s investigation and enforcement functions among others.