Effect of Audit Tenure on Financial Reporting Quality of Listed Industrial Goods Firms in Nigeria

Abstract

The adverse effect of poor corporate financial reporting not only impact negatively on the absentee owners but also on all other existing and potential users. This study examined effect of audit tenure on financial reporting quality of listed industrial goods firm in Nigeria covering the period of ten (10) years ranging from 2011-2020. The study adopted ex-post facto research design and secondary data was used as the source of data for this study which was obtained from Nigerian Stock Exchange. Panel regression analysis technique was used to analyse research data. The result showed that audit tenure has a positive and significant effect on discretionary accrual which is taken as a measure of financial reporting quality. The study concludes that audit tenure has significantly positive effect on financial reporting quality and does substantially reduce the discretionary accruals of listed industrial goods firms in Nigeria. The study therefore recommend that stakeholders and decision makers who are interested in the services of external auditors in listed firms in Nigeria should judge and determine the auditors tenure on the basis of effectiveness, efficiency and output and not just on other considerations. This is because large ‘earnings’ is not necessarily associated with auditors competence and quality of financial reporting of listed industrial goods firms in Nigerian.