Effect of Audit Attributes on the Financial Reporting Quality of Nigerian Insurance Companies

Abstract

This study investigated the association that exists between the audit attributes and the financial reporting quality of firms listed under insurance sector of Nigerian economy. The study had five objectives that include the investigation of audit type, audit tenure, joint audit, industry specialised audit and audit fee on the financial reporting quality as was measured by discretionary accruals using modified Jones model. The use of ex post facto research design was adopted which necessitated collection of secondary data from the annual report of the twenty two sampled insurance firms, from 2011 to 2020 financial years. The data were analysed using statistical tools like descriptive statistics, correlation analysis, fixed effect and random effect model tests, where Hausman test was used to choose the best between the two models, as a requirement for running panel data regression analysis. The empirical result therefrom indicates that audit type has positive and no significant effect on the financial reporting quality. Further result shows that audit fee has inverse statistical significant effect on financial reporting quality at 1% level. Nonetheless, audit tenure, joint audit and industry specialised audit have negative but no significant effect on financial reporting quality of the listed insurance firms. The study recommendations emanating from the findings among others maintain that the regulatory bodies should reaffirm that audit firms rely on professional benchmark-based fee calculation in every audit engagement, bearing in mind that any compromise or cut in audit fee, possibly as a result of competing for clients, would undermine the quality of financial reporting in the sector