IMPACT OF AUDIT QUALITY ON FINANCIAL REPORTING QUALITY OF LISTED OIL AND GAS FIRMS IN NIGERIA: THE MODERATING ROLE OF INTERNAL CONTROL SYSTEM (ICS)

This study investigates the impact of audit quality on the financial reporting quality of listed oil and gas firms in Nigeria, with a particular focus on the moderating role played by internal control systems (ICS). The Nigerian oil and gas sector is a cornerstone of the national economy, and high-quality financial reporting is essential for maintaining investor confidence and ensuring market transparency. Grounded in Agency Theory, Control Theory, and Positive Accounting Theory, the research explores how independent external audits and robust internal mechanisms collectively influence the integrity of financial information. ​A cross-sectional survey research design was adopted for this study, targeting management personnel and internal auditors from listed oil and gas firms. Data was collected from 50 respondents using a structured questionnaire based on a five-point Likert scale. The analysis utilized hierarchical multiple regression to test the research hypotheses. ​The findings reveal that audit quality has a statistically significant positive impact on financial reporting quality. Similarly, the effectiveness of internal control systems was found to have a significant positive relationship with the quality of financial reports. Most importantly, the results demonstrate that the internal control system significantly moderates the relationship between audit quality and financial reporting quality. This indicates that the positive influence of a high-quality audit is strengthened when an organization maintains an effective internal control environment. ​The study concludes that both strong external oversight and internal governance are vital for financial transparency in Nigeria’s oil and gas industry. It recommends that management prioritize the selection of high-quality auditors and invest in robust internal control frameworks to prevent financial misreporting and enhance accountability.