Accounting Project Topics

Effect of Audit on Financial Performance of Listed Manufacturing Company in Nigeria

Effect of Audit on Financial Performance of Listed Manufacturing Company in Nigeria

Effect of Audit on Financial Performance of Listed Manufacturing Company in Nigeria


Objective of the study

The objectives of the study are;

  1. To examine the effect of Auditor’s Independence on Return on Assets (ROA) of listed manufacturing company in Nigeria
  2. To evaluate the effect of Audit Committee on Return on Assets (ROA) of listed manufacturing company in Nigeria
  3. To determine the effect of Audit Fee on Return on Assets (ROA) of listed manufacturing company in Nigeria.



Conceptual Review

Audit quality

De Angelo (1981) defined audit quality as the market-assessed joint probability that a given auditor will both detect material misstatements in the client’s financial statements and report the material misstatements. Therefore, according to De Angelo’s (1981) definition, audit quality is a function of the auditor’s ability to detect material misstatements (technical capabilities) and reporting the errors (auditor independence). Palmrose (1988) defined audit quality in terms of level of assurance. Since the purpose of an audit is to provide assurance on financial statements, audit quality is the probability that financial statements contain no material misstatements. Audit quality is not primarily about auditing standards but about the quality of people, their training and ethical standards (Geiger & Rama, 2006). The Financial Reporting Council argues that the skills, personal qualities of audit partners and staff, and the training given to audit personnel are important factors that determine auditor quality (Francis & Wang, 2014).

Auditor’s Independence

Enofe, Mgbame, Okunrobo and Izon (2012) describe auditor’s independence as a metal state of objectivity and lack of bias. The researchers also state that public faith in the reliability of a corporation’s financial statements is dependent on the public perception of the outside auditor as an independent professional. Thus, the level of auditor’s independence is joint outcome of the policies and procedures implemented by the audit firm and the state of mind of the individuals involved in the particular audit assignment (Tepalagul & Lin, 2014). Harrison (2015) defines audit independence as the independence of the auditor in executing his duties. It is characterized by integrity and an objective approach to the audit process. The concept requires the auditor to carry out his or her work freely and in an objective manner. Okolie and Izedonmi (2014) see audit Independence as an auditor’s unbiased mental attitude in making decisions throughout the audit and financial reporting. They describe independence as the quality of being free from influence, persuasion or bias because in the absence of independence, the value of the audit service will be greatly impaired. If an auditor lacks independence, it will increase the possibility of being perceived as not being objective in his opinion or report. This means that the auditor will not likely report a discovered breach.





This chapter discuss the methodology adopted in this study. This comprises of the population, source and methods through which the data was collected. The techniques employed in the analysis of this data and the justification for the technique used are also contained in the chapter. Finally, the variable measurement, model specification and justification for use of control variables were presented.

Research Design

 The study adopted ex-post facto research design. The study was carried out in Nigeria, with particular reference to selected manufacturing firms that are listed  on  the  Nigerian  Stock Exchange (NSE). Secondary data were sourced from the annual reports and accounts of listed manufacturing firms in Nigeria from 2012 to 2021. The population of the study comprised all the listed manufacturing firms on Nigerian Stock Exchange (NSE). In Nigerian Stock  Exchange  (NSE),  the  total  sectors  of manufacturing firms is eight (8) namely Automobile & Tyre Sector, Breweries Sector, Building Materials Sector, Chemical & Paints Sector, Food, Beverages &Tobacco Sector, Health Care Sector, Oil & Gas Sector and Textiles Sector. These eight (8) sectors of listed manufacturing firms in Nigeria have a total of eighty (80) manufacturing firms. Of these eight (8) sectors and eighty (80) manufacturing firms, only six (6) sectors and twenty- four (24) manufacturing firms that is, four (4) firms each from each sector were selected for the study through purposive sampling technique.


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