EFFECT OF AUDIT QUALITY ON FINANCIAL PERFORMANCE OF LISTED DEPOSIT MONEY BANKS IN NIGERIA
Abstract
The issue of credibility of audited financial statements of banks in Nigeria has become so strong in the recent years as a result of a series of financial misreporting and a lack of proper corporate governance buildings. This study was done against this background with an aim of exploring the impact of the quality of the audit on the financial performance of the listed Deposit Money Banks (DMBs) in Nigeria. Audits quality was measured with the help of audit fee, audit tenure and audit independence and financial performance was measured with the help of Return on Assets (ROA), Liquidity (LIQ), and Net Profit Margin (NPM). The research design adopted was an ex-post facto research design where the researcher used secondary data by extracting data on the annual financial statements of thirteen (13) DMBs listed on the Nigerian Exchange Group within a ten-year span between the year 2015 and 2024. The approach taken was a total enumeration one and the data reliability was pegged on statutory audited reports despite the release of unqualified audit opinions. Descriptive statistics and inferential statistics were used to analyze the data. The results showed that ROA (Adj. R² = 0.566; F(3,126) = 12.19; p < 0.05), LIQ (Adj. R² = 0.226; F(3,126) = 3.51; p < 0.05) and NPM (Adj. R² = 0.239; F(3,126) = 2.72; p < 0.05) had a statistically significant Particularly, the audit tenure showed positive and significant correlation with ROA, negative impact on liquidity and net profit margin. Audit fees and auditor independence generated both mixed and statistically insignificant results. In general, the research concludes that the quality of the audits is one of the important determinants of the financial performance of listed DMBs in Nigeria. The study therefore advises the issue of the increased regulatory policies on auditor rotation, increased transparency in audit pricing and upholding auditor independence to augment the financial reporting credibility and revive the confidence of stakeholders.
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