AN EVALUATION OF INFLUENCE OF AUDIT QUALITY VARIABLES ON EARNINGS RESPONSE COEFFICIENT OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

Quality audit provides tool for uncovering errors and sending signals about the credibility of corporate financial statements. Reports of systemic failure and conflicting findings of academic researches on the financial health of Nigerian Deposit Money Banks (DMB) raised some queries on its Audit Quality(AQ).  This study examined the influence of Audit Quality Variables (AQV)   on Earning Response Co-efficient (ERC) of listed Deposit Money Banks in Nigeria. This study made use of secondary data obtained from annual reports and account of selected banks from 2010 to 2017. Purposive sampling technique was adopted to select six (6) banks out of twenty-one banks. Representative variables for AQ are Audit firm size (AUDS), Auditors Independence (AUDIN), and Non-Audit Services (NAS) while ERC was proxied using Unexpected Earnings (UE). Ordinary Least Square Regression was used to measure the influence of Audit Quality on Earnings Response Coefficient of DMBs in Nigeria at 0.05 level of significance. AUDS, AUDIN and NAS had a positive significant influence on ERC with t = 1.30, p = 0.003; t =1.21, p = 0.004; and t = 1.95, p = 0.001 respectively. With the R² and Adjusted R² (0.647 and 0.6600 respectively) confirmed the significant of the model. It therefore recommended that DMBs in Nigeria should endeavor to employ the services of one of the big audit firms in order to improve Audit Quality.