Effect of Audit Firm Tenure on Earnings Quality of Quoted Industrial Goods Companies in Nigeria

Abstract

The study examined the effect of audit firm tenure on earnings predictability and earnings persistence of quoted industrial goods companies in Nigeria. Two research objectives, research questions, and hypotheses were formulated to guide the investigation. The study adopted an expost facto research design and relied on secondary data extracted from the published annual financial statements of industrial goods companies listed on the Nigerian Exchange Group. The population comprised all quoted industrial goods companies, and a census approach was employed. Data were analyzed using descriptive statistics and Ordinary Least Squares (OLS) regression techniques. The findings revealed that audit firm tenure has a positive and significant effect on both earnings’ predictability and earnings persistence, indicating that longer auditor– client relationships enhance the reliability, stability, and quality of reported earnings. These results align with previous empirical evidence and suggest that sustained audit engagements improve auditors’ understanding of client operations, thereby strengthening financial reporting outcomes. It was concluded that audit firm tenure significantly enhances earnings quality in the industrial goods sector in Nigeria. The study recommends that regulatory authorities promote structured long-term audit engagements that support audit quality while safeguarding auditor independence, and that companies engage audit firms with proven records of long-term expertise to improve stakeholders’ confidence in financial reporting.