AUDITORS' INDEPENDENCE AND QUALITY OF FINANCIAL REPORTING IN LISTED NIGERIAN MANUFACTURING COMPANIES
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Sunday Otuya: Edwin Clark University, Postal: Department of Accounting & Finance,, Faculty of Humanities, Social and Management Sciences,, Kiagbodo, Delta State
International Journal of Accounting and Finance (IJAF), 2019, vol. 08, issue 1, 111-128
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.
Keywords: Auditors independence; Auditors incentives; Audit report lag; Auditor tenure; Financial reporting quality; Manufacturing companies. (search for similar items in EconPapers)
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