EFFECT OF AUDIT QUALITY ON THE FINANCIAL PERFORMANCE OF LISTED AGRICULTURAL FIRMS IN NIGERIA
Nwachukwu C. Kenneth, Ibrahim Aminu Yakassai and Saheed A. Lateef
Volume 5 Issue 1
Abstract
This study is based on an appraisal of the effect of audit quality on their financial performance in Nigeria. Audited financial statements of five of the agricultural firms who are listed on the stock exchange, were obtained from three periods of panel data to undertake the ex post facto research design using FMOLS method of analysis. Results find expertise and familiarity more strongly associated with both better financial performance and stronger relationships between expertise, familiarity and strength, all statistically significant at larger audit firms and greater audit tenure. By contrast, high non audit fees are associated with negative impact on performance as they might compromise independence. According to this, if financial reporting made objective and reliable, financial outcomes will benefit too while the auditor independence contributes to the area of actual positive effect for financial outcomes itself. Based on the findings, the study recommends policies that encourage the use of reputable audit firms that protect the firm’s independence of the auditor, and establish clear limits on non-audit services (to maximize audit quality). This study also advances existing literature by considering some of the peculiar challenges of the Nigeria’s agricultural sector and proffered suggestions that can be useful to stakeholders that wish to improve agricultural firm’s financial performance through strong audit culture. Keywords: Agricultural Firms; Audit Quality; Auditor Independence; Audit Tenure; Financial Performance.
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