AUDIT REPORT QUALITY AND VALUE OF CONSUMER GOODS FIRMS: EVIDENCE FROM NIGERIA

Abstract

There is little evidence available on whether audit report quality affects firm value. Therefore, this study examines the effects of audit report quality on value of consumer goods firms in Nigeria. The study relies on secondary data derived from various companies’ financial statements to determine firm value, applying an all-inclusive multivariate analysis. Samples of 18 consumer goods firms quoted in Nigeria Exchange limited were used for the period of eleven years spanning 2010 to 2020. The study employed ex-post facto and longitudinal research design. The data were collected from annual reports of the selected consumer goods companies and three (3) specific objectives and hypotheses were subjected to some  preliminary data tests such as descriptive statistics, Pearson correlation analysis and variance inflation factor and were analyzed using panel regression analysis. The empirical analysis using a total of 198 company-year observations, shows that audit fee and auditor education level have positive and significant effects on value of quoted consumer goods companies in Nigeria at 95% confidence level respectively. Generally, the value of R- squared which is the coefficient of determination stood at 44% which implies that 44% of the systematic variations in individual dependent variables were explained in the model while about 56% were unexplained thereby captured by the stochastic error term. In line with the above findings,  this study therefore recommends among others that, audit fees should be monitored to ensure that no audit firm has a client whose audit fee exceeds more than five per cent of total audit fee as suggested by the Institute of Chartered Accountants of Nigerian code of conduct for professional accountants.