IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v9y2025issue-6p4197-4218.html

Effect of Audit Independence on the Financial Reporting Quality of Listed Deposit Money Banks in Nigeria

Author

Listed:
  • Samson Ojeme Samuel

    (Department of Accounting, Achievers University, Owo, Ondo State, Nigeria.)

  • Owolabi Joseph Alade

    (Department of Accounting, Achievers University, Owo, Ondo State, Nigeria.)

Abstract

This study examines the effect of audit independence on the financial reporting quality of listed deposit money banks in Nigeria. The objectives are to explore the impact of audit fees, audit firm size, and audit tenure on financial reporting quality. An ex-post facto research design was adopted, employing both descriptive and inferential statistics to analyze data from 14 Nigerian listed deposit money banks, using secondary data from their annual reports (2016–2023). Panel regression models were applied, utilizing common, fixed, and random effects to account for cross-sectional and time effects. The findings indicate that higher audit fees exert a negative but statistically significant impact on financial reporting quality (P-Value 0.05). The study concludes that audit independence, particularly regarding audit fees and firm size, can undermine financial reporting quality. This highlights the need for regulatory reforms to ensure auditors’ independence. It recommends further exploration into the regulatory and professional standards to address these challenges in Nigeria’s banking sector.

Suggested Citation

  • Samson Ojeme Samuel & Owolabi Joseph Alade, 2025. "Effect of Audit Independence on the Financial Reporting Quality of Listed Deposit Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 9(6), pages 4197-4218, June.
    • Handle: RePEc:bcp:journl:v:9:y:2025:issue-6:p:4197-4218
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-9-issue-6/4197-4218.pdf
    Download Restriction: no
    File URL: https://rsisinternational.org/journals/ijriss/articles/effect-of-audit-independence-on-the-financial-reporting-quality-of-listed-deposit-money-banks-in-nigeria/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jensen, Michael C & Meckling, William H, 1979. "Rights and Production Functions: An Application to Labor-managed Firms and Codetermination," The Journal of Business, University of Chicago Press, vol. 52(4), pages 469-506, October.
    2. Kenny Adedapo Soyemi & Sunday Aderogba Adebayo & Ganiu Abiodun Fatai, 2024. "Board Gender Diversity and Financial Reporting Quality in Nigeria: Moderating Role of Auditor Quality," The Journal of Accounting and Management, Danubius University of Galati, issue 2(14), pages 20-35, August.
    3. Fahmi Givari Akbar & Khoirul Aswar & Noegrahini Lastiningsih, 2020. "Determinants of Audit Quality in Indonesia Supreme Audit Institution: A Conceptual Study," Information Management and Business Review, AMH International, vol. 12(2), pages 38-41.
    4. Dyah Ayu Larasati & Melinda Cahyaning Ratri & Mohammad Nasih & Iman Harymawan, 2019. "Independent audit committee, risk management committee, and audit fees," Cogent Business & Management, Taylor & Francis Journals, vol. 6(1), pages 1707042-170, January.
    5. Shivaram Rajgopal & Suraj Srinivasan & Xin Zheng, 2021. "Measuring audit quality," Review of Accounting Studies, Springer, vol. 26(2), pages 559-619, June.
    6. repec:eme:maj000:02686900910975341 is not listed on IDEAS
    7. Wisdom Kalabeke & Muhammad Sadiq & Ooi Chee Keong, 2019. "Auditors Tenure and Financial Reporting Quality: Evidence from a Developing Country," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 9(5), pages 335-341, May.
    8. Jensen, Michael C. & Meckling, William H., 2008. "Theory of the firm: managerial behavior, agency costs and ownership structure," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 48(2), April.
    9. Mahdi Salehi & Mahdi Saravani & Safoura Rouhi, 2020. "The relationship between audit components and audit market adaptability," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 27(3), pages 835-853, May.
    10. Shahanif Hasan & Aza Azlina Md. Kassim & Mohamad Ali Abdul Hamid, 2020. "The Impact of Audit Quality, Audit Committee and Financial Reporting Quality: Evidence from Malaysia," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 272-281.
    11. Tulus Suryanto, 2014. "Determinants of Audit Fee Based on Client Attribute, Auditor Attribute, and Engagement Attribute to Control Risks and Prevent Fraud: A Study on Public Accounting Firms in Sumatra-Indonesia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(3), pages 27-39.
    12. Harrison, Jeffrey S. & Wicks, Andrew C., 2013. "Stakeholder Theory, Value, and Firm Performance," Business Ethics Quarterly, Cambridge University Press, vol. 23(1), pages 97-124, January.
    13. Eman F. Attia & Sameh Yassen & Ahmed Chafai & Ahmed Qotb, 2024. "The impact of board gender diversity on the accrual/real earnings management practice: evidence from an emerging market," Future Business Journal, Springer, vol. 10(1), pages 1-18, December.
    14. Ammar Abid & Muhammad Shaique & Muhammad Anwar ul Haq, 2018. "Do Big Four Auditors Always Provide Higher Audit Quality? Evidence from Pakistan," IJFS, MDPI, vol. 6(2), pages 1-22, June.
    15. Ali R. Almutairi & Kimberly A. Dunn & Terrance Skantz, 2009. "Auditor tenure, auditor specialization, and information asymmetry," Managerial Auditing Journal, Emerald Group Publishing, vol. 24(7), pages 600-623, July.
    16. Hohenfels, D., 2016. "Auditor Tenure and Perceived Earnings Quality," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 84948, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    17. Efrizal Syofyan & Dovi Septiari & Sany Dwita & Mutia Rahmi, 2021. "The characteristics of the audit committee affecting timeliness of the audit report in Indonesia," Cogent Business & Management, Taylor & Francis Journals, vol. 8(1), pages 1935183-193, January.
    18. Achmad Dzulfikar Dzikrullah & Iman Harymawan & Melinda Cahyaning Ratri, 2020. "Internal audit functions and audit outcomes: Evidence from Indonesia," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1750331-175, January.
    19. Inas Aisyah Widyaningsih & Iman Harymawan & Agus Widodo Mardijuwono & Eka Sari Ayuningtyas & Dyah Ayu Larasati, 2019. "Audit firm rotation and audit quality: Comparison before vs after the elimination of audit firm rotation regulations in Indonesia," Cogent Business & Management, Taylor & Francis Journals, vol. 6(1), pages 1695403-169, January.
    20. Dobija, Dorota & Hryckiewicz, Aneta & Zaman, Mahbub & Puławska, Karolina, 2022. "Critical mass and voice: Board gender diversity and financial reporting quality," European Management Journal, Elsevier, vol. 40(1), pages 29-44.
    21. Brian Bratten & Monika Causholli & Thomas C. Omer, 2019. "Audit Firm Tenure, Bank Complexity, and Financial Reporting Quality," Contemporary Accounting Research, John Wiley & Sons, vol. 36(1), pages 295-325, March.
    22. Samagaio, António & Felício, Teresa, 2022. "The influence of the auditor’s personality in audit quality," Journal of Business Research, Elsevier, vol. 141(C), pages 794-807.
    23. Wisdom Kalabeke & Muhammad Sadiq & Ooi Chee Keong, 2019. "Auditors Tenure and Financial Reporting Quality: Evidence from a Developing Country," International Journal of Asian Social Science, Asian Economic and Social Society, vol. 9(5), pages 335-341.
    24. Samuel Akpovwre Eyenubo & Mudzamir Mohamed & Mohammad Ali, 2017. "An Empirical Analysis on the Financial Reporting Quality of the Quoted Firms in Nigeria: Does Audit Committee Size Matter?," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 7(9), pages 50-63, September.
    25. C. Okaro Sunday & Gloria O. Okafor & Grace N. Ofoegbu, 2018. "Mandating Joint Audits in Nigeria: Perspectives and Issues," International Journal of Academic Research in Business and Social Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Business and Social Sciences, vol. 8(3), pages 316-338, March.
    26. Mohammad Ziad Shakhatreh & Safaa Adnan Alsmadi & Ahmad Alkhataybeh, 2020. "The effect of audit fees on disclosure quality in Jordan," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1771076-177, January.
    27. Ali R. Almutairi & Kimberly A. Dunn & Terrance Skantz, 2009. "Auditor tenure, auditor specialization, and information asymmetry," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 24(7), pages 600-623, July.
    28. Jeffrey S. Harrison & Douglas A. Bosse & Robert A. Phillips, 2010. "Managing for stakeholders, stakeholder utility functions, and competitive advantage," Strategic Management Journal, Wiley Blackwell, vol. 31(1), pages 58-74, January.
    29. Nermeen Fathy Shehata, 2014. "Theories and Determinants of Voluntary Disclosure," Accounting and Finance Research, Sciedu Press, vol. 3(1), pages 1-18, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Florio, Cristina, 2024. "A structured literature review of empirical research on mandatory auditor rotation," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 55(C).
    2. Loan Nguyen T. K. & Dong Pham Xuan & Phuong Hoang Thi Lien, 2025. "CEO’s financial and accounting expertise on earning quality: The moderating role of audit quality," WSB Journal of Business and Finance, Sciendo, vol. 59(1), pages 81-92.
    3. Santos-Jaén, José Manuel & Valls Martínez, María del Carmen & Martín de Almagro Vázquez, Gema & León-Gómez, Ana, 2025. "The impact of audit fees and auditor tenure on company valuation: An analysis of large U.S. audit firms," The North American Journal of Economics and Finance, Elsevier, vol. 79(C).
    4. Vivek Soundararajan & Jill A. Brown, 2016. "Voluntary Governance Mechanisms in Global Supply Chains: Beyond CSR to a Stakeholder Utility Perspective," Journal of Business Ethics, Springer, vol. 134(1), pages 83-102, March.
    5. Ileana Maldonado-Bautista & Peter G. Klein & Kendall W. Artz, 2023. "The Role of Political Values and Ideologies of Entrepreneurs and Financiers," Entrepreneurship Theory and Practice, , vol. 47(1), pages 172-205, January.
    6. Murat Ocak & Emrah Arıoğlu, 2025. "Narcissism, Audit Market Competition and Audit Quality: Evidence from the Chairpersons of Audit Firms," SAGE Open, , vol. 15(4), pages 21582440251, October.
    7. Nadiah Amirah Nor Azhari & Suhaily Hasnan & Zuraidah Mohd Sanusi, 2020. "The Relationships Between Managerial Overconfidence, Audit Committee, CEO Duality and Audit Quality and Accounting Misstatements," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(3), pages 18-30, June.
    8. Ansgar Richter & Susanne Schrader, 2017. "Levels of Employee Share Ownership and the Performance of Listed Companies in Europe," British Journal of Industrial Relations, London School of Economics, vol. 55(2), pages 396-420, June.
    9. Alastair Marais, 2024. "Audit Quality and Financial Statement Manipulation: The Moderating Effect of Tone at the Top," International Journal of Economics and Financial Issues, Econjournals, vol. 14(5), pages 220-232, September.
    10. Raminder Kaur Bhatia & Prabhnoor Singh, 2024. "Relationship Between Bank-Specific Characteristics and Web-Based Disclosures of the Commercial Banks in India," Jindal Journal of Business Research, , vol. 13(1), pages 7-29, June.
    11. Akisik, Orhan & Gal, Graham, 2023. "IFRS, financial development and income inequality: An empirical study using mediation analysis," Economic Systems, Elsevier, vol. 47(2).
    12. Zhaoyang Guo & Siyu Hou & Qingchang Li, 2020. "Corporate Social Responsibility and Firm Value: The Moderating Effects of Financial Flexibility and R&D Investment," Sustainability, MDPI, vol. 12(20), pages 1-17, October.
    13. Associate Prof. J.O Arumona & Associate Prof. Orbunde B.B & BELLO, Musibau, 2023. "Liquidity and Working Capital Management Practices on Firm Value of Listed Non-Financial Companies in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 1049-1066, November.
    14. Joseph P. Hughes & Loretta J. Mester, 2008. "Efficiency in banking: theory, practice, and evidence," Working Papers 08-1, Federal Reserve Bank of Philadelphia.
    15. Francesco Gangi & Mario Mustilli & Lucia Michela Daniele & Maria Coscia, 2022. "The sustainable development of the aerospace industry: Drivers and impact of corporate environmental responsibility," Business Strategy and the Environment, Wiley Blackwell, vol. 31(1), pages 218-235, January.
    16. Nie, George Y., 2023. "Recover the Missing Dimension of Managerial Risk of Stockholdings and Option Grants," SocArXiv rcj8t_v1, Center for Open Science.
    17. Tortia, Ermanno C., 2021. "Employment protection regimes and dismissal of members in worker cooperatives," MPRA Paper 109214, University Library of Munich, Germany.
    18. Vontalge, Alan L., 1991. "A feasibility study of swine producer management cooperatives," ISU General Staff Papers 1991010108000018168, Iowa State University, Department of Economics.
    19. Guidi, Marco G.D. & Hillier, Joe & Tarbert, Heather, 2010. "Successfully reshaping the ownership relationship by reducing ‘moral debt’ and justly distributing residual claims: The cases from Scott Bader Commonwealth and the John Lewis Partnership," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 21(4), pages 318-328.
    20. Andrew West, 2016. "Applying Metaethical and Normative Claims of Moral Relativism to (Shareholder and Stakeholder) Models of Corporate Governance," Journal of Business Ethics, Springer, vol. 135(2), pages 199-215, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:9:y:2025:issue-6:p:4197-4218. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.