Audit Independence and Financial Reporting Quality of Listed Manufacturing Companies in Nigeria

Abstract

Notwithstanding the significance of the external audit function, scholars are actively examining the independence and sovereignty of the external auditor. The study evaluated the effect of audit independence on financial reporting quality of listed manufacturing companies in Nigeria. The study especially investigated the effects of audit tenure and audit fees on the integrity of financial reporting as demonstrated by the discretionary accruals of Nigerian manufacturing businesses that are listed. From 2015 to 2024, a span of ten (10) years, secondary data was taken from and received from the Annual Report and Accounts of ten (10) Nigerian listed manufacturing companies. To examine the gathered data, statistical methods such as multiple regressions, correlations, and descriptive statistics were employed. At the 5% significance level, the results showed that audit tenure had no discernible effect on the quality of financial reporting (p = 0.8242, > 0.05), while audit fees had a major effect on the financial reporting of Nigerian listed manufacturing businesses (p = 0.0273, < 0.05). The study found that while audit fees can be used to predict the financial reporting quality of the chosen manufacturing firms in Nigeria, audit tenure is not regarded as a reliable and significant predictor of the financial reporting quality of the chosen manufacturing firms. The research suggested that audit fees should be closely monitored since high payments from clients may result in bonding which may eventually jeopardize the auditor's independence, thereby affecting the quality of audit to be provided.