Effect of Audit Firm Attributes on Financial Reporting Quality of Listed Deposit Money Banks in Nigeria Moderated by Audit Committee Financial Expertise

Abstract

Despite the established importance of audit firm attributes in determining financial reporting quality, a significant gap existed in understanding the boundary conditions under which these attributes influenced reporting outcomes, particularly the moderating role of audit committee financial expertise in the Nigerian banking sector. This study examined the effect of audit firm attributes on financial reporting quality of listed deposit money banks in Nigeria moderated by audit committee financial expertise. The study adopted an ex-post facto research design with a population comprising fourteen quoted deposit money banks on the Nigerian Exchange Group as at December 31st, 2024. Through purposive and judgmental sampling techniques, thirteen banks were sampled. Data were sourced from secondary sources, from audited annual reports and financial statements covering an eleven-year period from 2014 to 2024. Panel data regression techniques were applied using EViews 10 for data analysis. The findings revealed that auditor tenure had a negative but statistically insignificant effect on financial reporting quality (p = 0.7963), while audit firm size has a negative and significant effect (coefficient = -0.000798, p = 0.0336). Audit committee financial expertise has a positive and significant direct effect (coefficient = 0.039184, p = 0.0001). The moderating effect of audit committee financial expertise on the auditor tenure-reporting quality relationship was significantly negative (coefficient = -0.002238, p = 0.0001), while its moderating effect on audit firm size was positive but insignificant (p = 0.7213). The study concluded that audit committee financial expertise played a critical moderating role, strengthening the inverse relationship between auditor tenure and reporting quality while directly enhancing financial reporting quality. It was recommended among others that regulatory authorities and bank boards should prioritize appointing audit committee members with substantial financial expertise and that banks should implement mandatory audit firm rotation policies after 5-7 years, particularly when audit committees possessed high financial expertise to mitigate independence concerns.