AUDIT QUALITY AND FINANCIAL PERFORMANCE OF LISTED FOOD AND BEVERAGES COMPANIES IN NIGERIA

Abstract

Ensuring the accuracy and dependability of an organization's financial evaluation demands adherence to professional norms, legal requirements, and acknowledged best practices linked to audit quality. This study delves into the impact of audit quality on the financial performance of ten Nigerian food and beverage companies that have been publicly listed from 2012 to 2021. Audit quality is assessed based on the promptness of audit reports and the standing of the auditors, while financial performance is gauged through return on assets. The researcher employed convenience sampling to gather secondary data from the audited financial statements and annual reports of the selected firms, presented in a panel format. A static panel data regression model was utilized to analyze the results. Findings from the pre-estimation tests (Poolability, BPLM Radom Effect and Hausman) indicated that fixed effect model is appropriate in the prediction of the companies financial performance, taking into consideration the selected audit quality indicators. The Findings emanating from the model fitted indicate that the reputation of the auditing firm significantly and positively influences the financial performance of the examined companies (t=2.2000, p-value=0.0305<0.05). Conversely, delays in the issuance of audit reports have an adverse and substantial impact on financial performance (t=-3.0412, p-value=0.0031<0.05). Consequently, the report suggests that the continuous engagement of the Big Four accounting firms is crucial to correctly evaluate financial performance, as well as on the efficient management and control of auditor tenure. Moreover, lengthier reporting gaps may signal a delay in disclosing unfavourable financial performance, underlining the significance of timely financial reporting in retaining openness and confidence in the financial markets.