Audit Quality and Financial Reporting Quality of Listed Insurance Companies in Nigeria

Abstract

The integrity of audit opinions regarding financial reports has been a matter of concern since the Enron accounting scandal in 2001 and the subsequent financial crisis that affected numerous organizations, despite the issuance of clean audit opinions by auditors over the years. Consequently, this study investigated the effects of audit quality on the financial reporting quality of listed insurance companies in Nigeria from 2014 to 2023. An ex-post facto research design utilizing panel data was employed, with the 22 companies in the insurance sector of the Nigerian Exchange Limited (NGX) forming the study’s population. Using a purposive sampling technique, a sample of 19 companies was selected. Secondary data relevant to the variables were collected from the annual reports of the sampled companies for the specified period and analyzed through descriptive statistics and multiple regression techniques. Findings indicated that the three joint proxies of audit quality (AQ)- audit firm size (AFS), audit firm fee (AFE), and audit firm tenure (AFT) significantly affect financial reporting quality (FRQ), as indicated by the use of relevant fair values (FVU). The study concluded that audit quality (AQ) plays a significant role in enhancing the financial reporting quality (FRQ) of listed insurance companies in Nigeria. Therefore, it is recommended that policymakers and regulatory authorities should strengthen the enforcement of policies aimed at ensuring quality financial reporting through quality audits.