EFFECT OF AUDIT QUALITY ON THE FINANCIAL PERFORMANCE OF LISTED AGRICULTURAL FIRMS IN NIGERIA

ABSTRACT:

This study investigates the effect of audit quality on the financial performance of listed agricultural firms in Nigeria for the period 2003-2022. An ex-post facto research design is employed. Four of the five (5) agricultural firms listed on the Nigerian Stock Exchange as of December 31, 2022 were used. Audit quality is proxied by audit committee size, Audit independence, audit committee activities, audit fee, external audit quality, and audit committee gender diversity, while financial performance was measured by return on asset. Findings reveal a significant positive relationship between audit committee size (β = 0.0750) and financial performance, measured by return on assets (ROA). Audit committee independence also showed a positive association (β = 0.0518), while audit committee activity exerted a negative but insignificant effect (β = –0.0085). Furthermore, external audit quality was found to have a negative and significant impact (β = –0.0969), whereas audit fees exhibited a positive but insignificant relationship (β = 0.00061). Additionally, audit committee female diversity demonstrated a negative and significant influence on financial performance (β = –0.1104). The study therefore recommends that listed agricultural firms in Nigeria should ensure adequate audit committee representation. Firms should also review audit fees where necessary to support higher audit quality.

Keywords: Audit Quality, Audit Committee Independence, Audit Fees, Audit Committee Size, Return on Assets