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Auditors' Independence And Quality Of Financial Reporting In Listed Nigerian Manufacturing Companies

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  • Otuya, Sunday

    (Edwin Clark University)

Abstract

This study examined the relationship between auditors' independence and quality of corporate financial reporting in Nigeria. The study was anchored on the AgencyTheory and adopted the content analysis research design. Data were collected from annual reports oflisted manufacturing companies for the period 2013 to 2017. Some descriptive and correlation statistics were deployed as tools of analysis while regressions were used to examine the relationship between the variables highlighted in the study. Findings ofthe study indicate that audit incentives, audit tenure and audit client size have a significant positive relationship with quality of financial reporting. The study also finds that audit reporting lag has a positive but insignificant correlation with financial reporting quality whereas auditor's status such as being one ofthe big 4 audit firms has a significant negative relationship with quality of financial reporting. The study concludes that longer auditor tenure and higher incentives promote independence of the auditor which by extension improves quality of financial reporting. The study recommends that audit firms should charge reasonable fees to ensure adequate compensation for engagement staff as this will promote independence. The study further suggests that Financial Reporting Council of Nigeria (FRC) and other regulatory bodies should increase the three years mandatory professional requirement for auditors so as to encourage longerauditortenure.

Suggested Citation

  • Otuya, Sunday, 2019. "Auditors' Independence And Quality Of Financial Reporting In Listed Nigerian Manufacturing Companies," International Journal of Contemporary Accounting Issues-IJCAI (formerly International Journal of Accounting & Finance IJAF), The Institute of Chartered Accountants of Nigeria (ICAN), vol. 8(1), pages 111-128, June.
    • Handle: RePEc:ris:ijafic:0018
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    References listed on IDEAS

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