Audit Quality and Accrual Quality in Nigerian Quoted Manufacturing Firms

Abstract

The impact of an audit on the accounting information quality stem from its role in mitigating the falsification of the economic and financial reality of the firm. Accordingly, the financial information audited by an external auditor is inclined to have better information content, helping users in making better decisions and as such generating greater economic benefits. However, the series of corporate failures in the world has made financial report users question the audit quality for decision making. The quality of an audit has been a debated issue in recent times and evidences put forward show that lack of audit quality is among the most significant reason for financial and corporate scandals. This study investigated the effect of audit quality on accrual quality of Nigerian listed manufacturing firms.  The study employed ex-post facto research design. The population of the study was 53 manufacturing firms listed on the Nigerian Stock Exchange as at 31^st December 2017. A sample of 30 firms for a period of 10 years (2008-2017) was selected purposively. Data were analyzed using mean, percentages, pooled OLS, random effect, fixed effect and generalized least square method. The study found that audit firm size and audit committee expertise exerted a significant positive influence on accrual quality, size exerted a significant negative influence on accrual, audit tenure and sector based specialization had insignificant negative effect on accrual quality, while audit firm independence and age had insignificant positive effect on accrual quality while. But the relationship between the number of audit firm engaged and accrual quality is in doubt, this relationship could not be proved or disproved based on the regression analysis result. This study concluded that audit firm size, audit tenure, sector based specialization, audit firm engaged, audit firm independence, audit committee expertise after being controlled by size and age of the firms bring about accrual quality. The study recommended that in relying on the financial report to take decisions, users of these statements should consider these major audit attributes which have been found to greatly improve the accounting numbers.