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ABSTRACT
This study investigates the effect of audit quality on Audit quality plays a significant role in maintaining
the financial performance of deposit money banks in an efficient market environment and independent
Nigeria. The study adopted ex post facto research quality audit underpins confidence in the credibility
design, data for the study were collected from annual and integrity of financial statements which is essential
reports
ts and accounts of quoted Nigerian deposit for well-functioning
functioning markets and enhanced financial
money banks. Regression analysis and coefficient performance (Farouk
Farouk & Hassan, 2014).
2014
correlation were employed to test the formulated
hypotheses. Findings revealed that there is a Banks and other financial intermediaries are the heart
significant effect between audit quality and financial of the world's recent financial crises. The
performance of Nigerian deposit money banks. Based deterioration of their asset portfolios, coupled with
on this, the study recommends among others that the fraudulent acts of presenting fictitious financial
management of deposit money banks in Nigeria statements and lack of adherence to corporate
should increase the number of foreign directors that governance principles largely due to distorted credit
have skills, experience and would like to protect their management, were some of the main structural
integrity, reputation
putation and professional competence. sources of the crises (Sanusi, 2010; Kashif, 2008;
Fries, Neven & Sea bright, 2002). This draws the
Keyword: Audit Quality, Financial Performance, attention of the public and investors to see the board
Deposit Money Banks in Nigeria of directors as the major actor responsible for the
failure of corporations, both in developed and
INTRODUCTION developing nations. In fact, board of directors are
The financial statement audit is a monitoring criticized
icized for being responsible for mismanagement of
mechanism that assists in reducing the information shareholders’ wealth, both in developed and
asymmetry and protects the interests of the various developing economies, more especially, in Nigeria
stakeholders by providing them reasonable assurance where this study is being conducted. They are seen as
that the financial statements are free from material the fore-runner
runner or prime factor for the fraud cases that
misstatements. Meanwhile, the societal role of had
ad resulted in the failure of major corporations, such
auditors is a key contribution to financial as Enron Corporation, Tyco International, WorldCom,
performance, in terms of reducing tthe risks of Global Crossing, Arthur Anderson, Marconi,
significant misstatements and by ensuring that the Parmalat, Oceanic bank plc, Wema bank plc,
financial statements are elaborated according to NAMPAK, Fin bank, Spring bank, Afribank,
fundamental rules and regulations, hence, lower risks Intercontinental bank, Bank PHB and Cadbury PLC in
on misstatements increase confidence in capital Nigeria (Adeyemi & Fagbemi, 2011; Ogbonna &
markets, which in turn lowers the firms co
cost of capital Ebimobowei, 2011; Ajibolade, 2008).
(Heil, 2012; Watts and Zimmerman, 1986).
The questionable role of auditor's in ensuring the
quality, reliability and credibility of financial
Where:
AUDCSIZ = audit committee size.
ACIND= audit committee independence.
FINPFM = financial performance proxy by Return on equity.
ANALYSIS OF DATA
Test of Hypotheses Formulated
Table 1: Model Summary
Model R R Square Adjusted R Square Std. Error of the Estimate
1 .141a .020 .003 .032560
a. Predictors: (Constant), AUDIND, AUDSZE
Table 2: ANOVAa
Model Sum of Squares df Mean Square F Sig.
Regression .002 2
.001
Residual .121 114 1.151 .320b
.001
Total .123 116
a. Dependent Variable: FINPERM
b. Predictors: (Constant), AUDIND, AUDSZE
Table 3: Coefficientsa
Unstandardized Coefficients Standardized Coefficients
Model t Sig.
B Std. Error Beta
(Constant) .084 .043 1.937 .055
AUDSZE -.011 .007 -.143 -1.511
- .134
AUDIND .000 .001 -.017 -.176 .861
a. Dependent Variable: FINPERM
Table 1 above shows that the Model revealed the variable (Beta Column) shows that audit quality is
value of R2 = 0.020 and Adjusted R2value is .003 this positive and significant (Sig.=
ig.= 1.050). Therefore audit
suggests that the model explains about 2% of the quality has a significant effect on financial
systematic variations in the dependent variab
variable. This performance of deposit money banks in Nigeria.
means that the regression explains 2% of the variance Based on this, we reject null hypotheses and accept
in the data. In table 2, it reveals that the F
F-stat (1.151) alternative with state that audit quality has effect on
and p-value
value (0.320) indicates that the hypotheses of a financial performance using g return on equity of
statistically significant linear relationship between the deposit money banks in Nigeria.
dependent and independent ndent variables cannot be
rejected at 5% level. In table 3, the regressed Discussion of Findings
coefficient correlation result shows that an evaluation From the results, audit quality (audit committee audit
of the financial performance of the explanatory committee independence) has significant effects on