Audit Quality and Financial Reporting Quality of Quoted Manufacturing Firms in Nigeria

Abstract

The quality of financial reports has been a contemporary discuss in accounting and finance literature as it is capable of helping investors or the users of financial statement to make timely and informed economic decision. Financial statement should portray features like relevance, faithful understandability and timeliness. The reporting quality from literature is seen not to possess the relevant qualities as expected which has become worrisome for investors and stakeholders. The study investigated the effect of audit quality on the financial reporting quality of quoted manufacturing firms listed in Nigeria, employing a survey research design. The population of interest consisted of 250 auditors and accountants, with a sample size of 201 selected using the Taro Yamane Formula and purposive sampling. Data were gathered through a well-structured questionnaire and analyzed using both descriptive and inferential statistics. Findings revealed that audit quality had a significant impact on the relevance of financial reports (Adj. R² = 0.766; F = 99.565; p = 0.00) and also notably influenced the faithful representation of financial reports (Adj. R² = 0.598; F = 47.930; p = 0.00). The study concluded that audit quality plays a critical role in enhancing the financial reporting quality of listed manufacturing firms in Nigeria. The study recommended that management should prioritize the presentation of financial reports to improve their relevance to users.

Keywords: Audit Quality, Financial Reporting, Financial Statement, Faithful Representation, Relevance, Understandability