AN EMPIRICAL ANALYSIS OF AUDIT QUALITY AND FINANCIAL STATEMENT RELIABILITY OF LISTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

The study examined audit quality and financial statement reliability of listed Deposit Money Banks (DMBs) in Nigeria, spanning from 2012 to 2022, using a sample of seven selected banks. A comprehensive analysis was conducted using correlation diagnostic tests and regression analysis. The regression model, supported by an ANOVA test, demonstrated overall statistical significance, indicating that the included variables collectively explain a substantial portion (R-square = 84.76%) of the variability in Return on Assets (ROA). Auditor independence and bank size were found to be statistically significant predictors, implying a positive influence on ROA. The findings revealed a strong positive correlation between ROA and auditor independence, suggesting that maintaining a high level of auditor independence may positively influence the profitability of Deposit Money Banks and the reliability of financial statements. The study recommends that, to ensure a high level of auditor independence, there should be continuous rotation of auditors at a maximum interval of three years by Deposit Money Banks. Additionally, a committee of shareholders should be established to screen and appoint auditors before presenting them to the general body of shareholders for ratification at the Annual General Meeting (AGM), rather than allowing the board of directors to appoint auditors directly.