Audit Quality and Financial Performance of Deposit Money Banks in Nigeria

Abstract

This study assess the effect of audit report quality on financial performance of deposit money banks in Nigeria. The study specifically examined audit fee, audit committee size and timelines of audit report to determine the effect of audit quality on financial performance of deposit money banks in Nigeria from the period of 2012 to 2021. The study examined six deposit money banks for the period under study. The study used purposive sampling method to select six banks based on access to their financial report, consistency and readiness of the reports. The study used a pooled data technique to establish the nexus between the variables and financial performance. econometric approaches such as Augmented Dickey Fuller test, Unit Root test, Johansen, Cointegraation and Error Correction Model (ECM) to check for autocorrelation were adopted in the analysis. Multiple regressions were employed to establish the relationship between the dependent and independent variables. Descriptive method of analysis was also adopted to understand the trends of variables; correlation matrix was employed to identify the relationship between the independent variables while granger causality was used to identify the direction of influence of the variables. Findings of the study show that audit fee and audit committee size have negative and insignificant effect on return on asset of deposit money bank in Nigeria, however, timeliness of audit report has a positive effect on return on asset. The study therefore concludes that investors consider all relevant information about firm performance. Smaller audit size will cost less remuneration. The study recommends that audit committee size be kept as minimum, as possible. Deposit money banks should ensure auditors are remunerated in tune with the quality of their work. Audit reports should be timely presented to stakeholders.