AUDIT QUALITY IN THE NIGERIAN BANKING SECTOR

ABSTRACT

This study examined the factors which influence the quality of audit work in the Nigerian banking industry. The study identifies the influence of auditor tenure, audit firm size and audit-client economic bonding as crucial determinants of the level of audit quality. Consequently, the study hypothesizes that these variables have the likelihood of affecting the quality of the audit work. The methodology adopted for this study is the survey research design. The population consists of all bankingcompanies listed/quoted on the Nigerian Stock Exchange. Random sampling was used to select a sample of 12 banks examined for 2005-2013 financial years. Secondary data from financial statements of the sampled banks were used for the study. In conducting the regression analysis for this study, the ordinary least squares regression technique wasutilized. The research adopted the three widely used binary regression models (Logit, Probit and Gompit). The study finds that (i) Auditor tenure has no significant relationship with audit quality; (ii) Economic bonding has a significant relationship with audit quality; (iii) Audit firm size has a significant relationship with audit quality. In the light of the research work, the following policy recommendations are suggested;Firstly, the need for rotation of auditors and regulation of auditor tenure (Though established in most developed economies remains at a budding stage in the Nigerian environment). The recommendation thus, is that companies must evaluate objectively the cost-benefit implications of tenure, and determine at what point it will be needful to rotate its auditors. The study recommends the need for regulation of audit fees in the Nigerian environment.  The influence of economic bonding between the auditor and the client is a factor that must be examined critically if efforts at improving audit quality will be expected to yield meaningful results.