Moderating Role of Firm Size in the Relationship Between Audit Characteristics and Corporate Reporting Quality of Manufacturing Firms in Nigeria

Abstract

The study examined the moderating effect of firm size on the relationship between audit attributes specifically audit frequency and audit fees and corporate reporting quality (CRQ) of Nigeria's listed manufacturing firms. An ex-post facto research design was employed, and panel data were gathered from the audited financial reports of 10 purposively selected manufacturing firms listed on the Nigerian Exchange Group (NGX) between 2015 and 2024. Descriptive statistics, correlation analysis, and fixed effects panel regression were employed for data analysis, while firm size was used as a moderating variable. Regression analysis showed that audit frequency significantly and positively affected CRQ (β = 0.021, p = 0.038), whereas audit fees significantly and negatively affected CRQ (β = -0.003, p = 0.017). The firm size by audit frequency interaction (FSZ × AFR) was also significant positively (β = 0.008, p = 0.009), indicating that firm size increased the positive relationship between audit frequency and reporting quality. On the other hand, the interaction of firm size and audit fees (FSZ × AFE) was significant negatively (β = -0.002, p = 0.037), showing that firm size reinforced the negative effect of audit fees on reporting quality. The model explained 33.4% of the variation in CRQ (R² = 0.334) and was statistically significant (F = 12.61, p < 0.01). The study recommended that manufacturing firms improve audit committee communication, manage audit fees closely, and modify audit monitoring mechanisms by firm size to increase transparency, reporting quality, and investor confidence.