Effect of External Auditor’s Characteristics on the Financial Reporting Quality of Quoted Manufacturing Companies in Nigeria

Abstract

This study examined auditor’s characteristics and financial reporting quality of quoted manufacturing companies in Nigeria. Specifically, the study focused on audit fees, auditors’ industry specialization, auditor’s tenure and audit firm size as independent variables and financial reporting quality as dependent variable proxied by discretionary accruals. Descriptive longitudinal research design was adopted. The population included all the 44 quoted manufacturing companies in Nigeria. However, a sample size of 30 was used. Data was obtained from the annual reports of the companies. The study employed the use of multiple regression analysis technique to analyse the data. Based on the analysis, it was found that audit fees, audit firm size and auditor industry specialization have positive significant effect on financial reporting quality while auditor tenure was found to have no significant effect on financial reporting quality of quoted manufacturing companies in Nigeria. The study concluded that external auditor’s attributes have strong explanatory power in determining the quality of financial reporting and is an effective corporate governance mechanism for constraining the problem of earnings manipulation in financial report of companies. The study therefore, recommended that there is need for companies, accounting regulators, Financial Reporting Council of Nigeria and indeed all stakeholders to consider an expanded approach in examining auditor attributes and financial reporting quality in Nigeria.

Keywords

References