AUDIT QUALITY AND FINANCIAL PERFORMANCE OF DEPOSIT MONEY BANKS IN NIGERIA
Abstract
This study explores the effect of audit quality on the financial performance of deposit money banks (DMBs) in Nigeria. Specifically, the study investigated the effect of auditors’ renumeration, audit firm size, bank size and leverage on return on asset of eight internationalized deposit money banks in Nigeria for the period covering from 2011 to 2023. To achieve this, secondary data was used and sourced from the audited financial statements of the sample deposit money banks. To perform the analysis a balanced panel dataset was built, and the empirical model explaining the link between audit quality and financial performance index was estimated using the fixed effects and random effects method. From the Hausman test, the fixed effects method was considered appropriate for estimation and the results of the fixed effects method shows that auditors’ renumeration and bank size had insignificant positive impact on financial performance of the deposit money banks studied. Through the fixed effects method, the study confirmed that audit size had significant positive relationship with financial performance, while an insignificant negative relationship was found between leverage and financial performance of DMBs. The study recommends that, management of deposit money banks should pay prudent fee for audit services such that it does not influence the judgement of the auditors on the financial statements.
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Published in UNIPORT JOURNAL OF BUSINESS, ACCOUNTING & FINANCE MANAGEMENT
ISSN: 1596-9911
This article appears in our peer-reviewed academic journal
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