Audit Independence, Audit Firm Rotation and Audit Fees: Effects on Audit Quality of Listed Healthcare Companies in Nigeria
Abstract
This study examined the effect of audit independence, audit firm rotation and audit fees: effects on audit quality of listed healthcare companies in Nigeria. Specifically, the study investigated the effects of audit independence, audit firm rotation, audit fees, audit firm size, and audit firm tenure on audit quality. An ex post facto research design was adopted, using secondary data obtained from the annual reports and audited financial statements of seven healthcare companies listed on the Nigerian Exchange Group for the period 2016–2025. A census sampling technique was employed, while panel regression analysis was used to estimate the relationships among the variables. Audit quality was measured using discretionary accruals estimated with the Modified Jones Model. The results showed that audit independence had a positive but statistically insignificant effect on discretionary accruals (β = 0.018, p = 0.703), while audit firm rotation had a negative and statistically significant effect (β = −0.234, p = 0.020). Audit fees had a positive and statistically significant effect on discretionary accruals (β = 0.289, p = 0.035). The findings indicate that audit firm rotation is associated with lower discretionary accruals, whereas higher audit fees are associated with higher discretionary accruals. The study concludes that audit firm attributes have important implications for audit quality in Nigeria’s listed healthcare sector, particularly through auditor rotation and fee structures. It recommends strengthening mechanisms that promote effective auditor rotation and ensuring that audit fees provide adequate resources for audit engagements without creating excessive economic dependence.
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