AUDIT FIRM ATTRIBUTES AND AUDIT QUALITY OF LISTED INSURANCE FIRMS IN NIGERIA

ABSTRACT

This study investigated the effect of auditor’s firm attributes on audit quality of listed insurance firms in Nigeria. The study covered twenty-one insurance companies listed on the Nigerian Exchange Limited. The study’s independent variables included audit fees, non-audit services, client importance, audit firm tenure and audit firm rotation, while the dependent variable was audit quality measured using the dichotomous procedure (1,0), where 1 was indicative of financial report audited the big 4 audit firm, and 0 if not. The study’s data were evaluated using the Binary Logit regression, and tested at a significance level of 5%. The findings from the analysis revealed that that audit fees had significant effect on the audit quality of the sampled companies while non-audit services, client importance, audit firm tenure and audit firm rotation did not have any significant effect. It was concluded that audit firm attributes with emphasis on audit fees have significant effect on the audit quality of insurance firms in Nigeria. Based on the findings, the study recommended that: firms should carefully evaluate and allocate appropriate resources for audit fees; caution should still be exercised to ensure independence and objectivity; firms should remain mindful of the risks associated with high client importance and prioritize maintaining independence in the auditing process; ongoing monitoring and evaluation of audit firm performance and independence is needed; and firms should carefully weigh the costs and benefits before making decisions on mandatory rotation, considering factors such as the cost of equity capital and stakeholder perception.