EXTERNAL AUDITOR’S ATTRIBUTES AND FINANCIAL REPORTING QUALITY OF MANUFACTURING COMPANIES IN NIGERIA

Abstract

This study examined the connection between external auditor characteristics, as one of the
important features of good corporate governance and financial reporting quality of quoted
manufacturing companies in Nigeria. Specifically, the study focused on audit fees, auditors’
industry specialization, auditor tenure and audit firm size as independent variables and financial
reporting quality as a dependent variable proxied by discretionary accruals. A descriptive
longitudinal research design is adopted. The population included all 44 quoted manufacturing
companies in Nigeria. However, a sample size of 29 was arrived at using the Yamane sample size
determination formula. The study covered the period 2011 to 2020 and utilized secondary data
extracted from the annual accounts of the companies for the period of the study. The study
employed the use of multiple regression analysis techniques to analyse the data with the aid of
STATA version 16. From the regression results, it was revealed that audit fees, audit firm size and
auditor industry specialization have a statistically positive significant effect on financial reporting
quality while auditor tenure was found to have no significant influence on the financial reporting
quality of quoted manufacturing companies in Nigeria. The study concluded that external auditor
attributes have strong explanatory power in determining the quality of financial reporting and are
an effective corporate governance mechanism for constraining the problem of earnings
manipulation in the financial report of companies. The study, therefore, recommended that there
is a need for companies, accounting regulators, the Financial Reporting Council of Nigeria and
indeed all stakeholders to consider an expanded approach in examining the quality of attributes
of external auditors in Nigeria.