Effect of audit tenure and financial reporting quality among listed firms in Nigeria

Abstract

This study examined the effect of audit firm tenure on financial reporting quality among listed firms in Nigeria. The study was motivated by concerns about auditor independence, familiarity threats, audit effectiveness, and the credibility of corporate financial reports. Specifically, it investigated the effects of short-term audit tenure, long-term audit tenure, and audit partner rotation on financial reporting quality. The study used secondary data from the audited annual reports of ten purposively selected firms listed on the Nigerian Exchange Group (NGX) for 2020–2025, yielding 60 firm-year observations. Financial reporting quality was proxied by Big Four auditor affiliation, while short-term audit tenure was measured as audit-firm tenure of five years or less and long-term tenure as tenure exceeding five years. Audit partner rotation was measured as a change in the engagement audit partner during the year. Multiple regression analysis was employed to test the specified relationships. The findings revealed that short-term audit tenure had a positive and statistically significant effect on financial reporting quality (β = 0.18; p = 0.011), whereas long-term audit tenure had a negative and statistically significant effect (β = −0.26; p = 0.002). Audit partner rotation also had a positive and statistically significant effect (β = 0.21; p = 0.001). Firm size was positively significant, while leverage had a negative and significant effect. The study recommends transparent disclosure of audit tenure, compliance with partner rotation requirements, and stronger regulatory enforcement of auditor independence safeguards.