EMPIRICAL ANALYSIS OF THE INFLUENCE OF AUDITOR INDEPENDENCE ON FINANCIAL REPORTING INTEGRITY: EVIDENCE FROM LISTED COMPANIES IN NIGERIA (2010–2023)
Ibrahim Abubakar, PhD , Ahmed Sule Liman Katagum , Rashida Barau & Halimatu Sadiya Ibrahim
Volume 11 Issue 7
Abstract
This study investigates the influence of auditor independence on financial reporting integrity among selected listed companies in Nigeria from 2010 to 2023. The main objective is to examine how audit tenure, audit fee ratio, and auditor rotation impact financial reporting integrity, indicators by discretionary accruals, earnings management, and financial restatements. The study employed an ex post facto research design, using secondary panel data obtained from the annual reports of six publicly listed Nigerian companies across various sectors, including Dangote Cement, Zenith Bank, MTN Nigeria, Nestlé Nigeria, Access Holdings, and Nigerian Breweries. Data were analyzed using panel regression models estimated via fixed effects, based on Hausman test results. Diagnostic tests, including the Breusch-Pagan test, Durbin-Watson statistic, and correlation matrix, confirmed the validity of model assumptions such as homoskedasticity, absence of autocorrelation, and lack of multicollinearity. Empirical findings reveal that audit tenure has a significant negative effect on all indicators of financial reporting integrity, indicating improved transparency with longer auditor engagement. In contrast, audit fee ratio positively correlates with financial restatements and discretionary accruals, suggesting that economic dependence impairs auditor objectivity. Auditor rotation showed no significant effect. The study recommends limiting audit fee concentration, complementing rotation policies with audit quality reviews, and enhancing corporate governance oversight. These findings offer valuable insights for regulators, policymakers, and corporate boards seeking to strengthen audit effectiveness and financial reporting quality in emerging markets. Keywords: Auditor Independence, Financial Reporting Integrity, Discretionary Accruals, Audit Tenure, Audit Fee Ratio.
Download Paper