Impact of Audit Market Concentration and Auditor Attributes on Audit Quality of Consumer Goods Firms in Nigeria
DOI:
https://doi.org/10.33003/fujafr-2024.v2i1.79.166-177Keywords:
Audit Market Concentration, Audit Quality, Auditor Attributes, Auditor Independent, Auditor TenureAbstract
This study investigated the relationship between audit market concentration, auditor attributes, and audit quality of quoted consumer goods firms in Nigeria. A purposive sampling technique was used to select five (5) quoted consumer goods firms that consistently published their annual reports from 2012 to 2020. Secondary data were sourced from annual reports of the selected quoted consumer goods in Nigeria. Data collected were analyzed using the pooled regression least square estimation technique. The result of the study revealed that audit market concentration exerts a positive and significant effect on the audit quality of quoted consumer goods firms in Nigeria. The result also indicates that the auditor’s independence positively and significantly impacts audit quality. In contrast, the auditor’s tenure has an insignificant positive effect on the audit quality of quoted consumer goods firms in Nigeria. Based on these findings, this study concludes that audit market concentration and auditor attributes improve audit quality of consumer goods firms in Nigeria. The study, therefore, recommends that firms ensure frequent auditor rotation to limit the chances of auditor-client over-familiarity which will jeopardize independence and reduce audit quality.
References
Adeniji, S.I. & Mieseigha, E.G. (2013). Audit Tenure: An Assessment of Its Effect on Audit Quality in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 275-283.
Barghathi, Yasser; Ndiweni, Esinath; and Lasyoud, Alhashmi Aboubaker, (2020). "Joint audit, audit market concentration, and audit quality: Perceptions of stakeholders in the UAE" All Works. 2188. https://zuscholars.zu.ac.ae/works/2188
Obeitoh, O. O., Yunusa, A., & Yusuf, M. A. (2023). Effect of Board and Audit Committee Attributes on Earnings Management: Evidence from Listed Non-Financial Firms in Nigeria: Audit Committee, Board Expertise, Boards’ Size, Earnings Management and Financial Expertise. FUDMA Journal of Accounting and Finance Research [FUJAFR], 1(2), 33–50.
Aggreh, M. (2019). Effect of Audit Market Concentration and Auditors' Attributes on Audit Quality in the Quoted Nigerian Manufacturing Firms. International Journal of Accounting & Finance, 97-110.
Agoes, S. & Rahmina, L.Y. (2014). Influence of Auditor Independence, Audit Tenure and Audit Fee on Audit Quality of Members of Capital Market Accountant Forum in Indonesia. Procedia-Social and Behavioural Sciences, 164, 324-331.
Aliu, M.M., Okpanachli, J. & Mohammed, N.A. (2018). Auditor’s Independence and Audit Quality: An Empirical Study. Accounting & Taxation Review, 2(2), 15-27.
Alsmairat, Y.Y., Yusoff., W.S., Ali., M.A. & Ghazalat, A.N. (2019). The Effect of Audit Tenure and Audit Firm Size on the Audit Quality: Evidence form Jordanian Auditors. International Journal of Business and Technopreneurship, 9(1), 15-24.
Baah, G.K. and Fogarty, T.J. (2018). What Auditors Think About Audit Quality - A New Perspective on Old Issue, Journal of Management Issues, XXX (4), 404-504.
Bandyopadhyay, S.P., Chen, C. & Yu, Y. (2014). Mandatory Audit Partner Rotation, Audit Market Concentration, and Audit Quality: Evidence from China. Advances in Accounting, Incorporating Advances in International Accounting, 30(1), 18-31.
Bengoriz, F., Khosravipoor, N. & Noroolahzadeh, N. (2020). Study the Effect of Audit Market Concentration on Auditors 'Job Stress and Audit Quality of Tehran Stock Exchange (TSE) Listed Firms. Advances in Mathematical Finance & Applications, 5(1), 113-128.
Boone, J. P., Khurana, I. K. & Raman, K. K. (2012). Audit market concentration and auditor tolerance for earnings management. Contemporary Accounting Research, 29(4), 1171 -1203
Buntara, A. A. & Adhariani, D. (2019). Audit Tenure and Audit Quality: The Renewal Sense of Comfort? Australasian Accounting, Business and Finance Journal, 13(4), 1-24.
Crucean, A.C. & Hategan, C. D. (2019). The Determinants of Audit Quality: A Theoretical Approach, “Ovidius” University Annals, Economic Sciences, Vol. XIX, Issues 2
DeAngelo, L.E. (1981). Audit Size and Audit Quality. Journal of Accounting and Economics, 3, 183-199
DeFond, M. & Zhang, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, 58, 275-332.
DeGroot, E. S. (2017). Audit Market Dynamics: Effects on Audit Quality. Marble Research Papers, 107-121.
Eguasa. B.E.(2017). Audit Market Concentration and Audit Quality in Nigeria. Journal of Business and Management, 19(9), 01–09.
Elaoud, A. & Jarboui, A. (2017). Auditor Specialisation, Accounting Information Quality and Investment Efficiency, Research in International Business and Finance, 42, 616-629.
Enofe, A.O., Mgbame, C. Aderin, A. Ehi-Oshio, O.U. (2013). Determinants of Audit Quality in the Nigerian Business Environment. Research Journal of Finance and Accounting, 4 (4), 36-43
García-Blandón, J. & Argilés-Bosch, J. M. (2017). The interaction effects of firm and partner tenure on audit quality. Accounting and Business Research, 47(7), 810-830
Garcia‐Blandon, J., Argilés‐Bosch, J. M. & Ravenda, D. (2019). Audit firm tenure and audit quality: Across‐European study. J Int Financ Manage Account, 1–30
Gros, M., Koch, S. & Wallek, C. (2017). Internal Audit Function Quality and Financial Reporting: Results of a Survey on German Listed Companies. Journal of Management and Governance, 21(2), 1-39.
Gul, F.A., Jaggi, B.L., & Krishnan, G. V. (2007). Auditor Independence: Evidence on the Joint Effects of Auditor Tenure and Non-audit Fees. Auditing: A Journal of Practice and Theory, 26(2), 117-142.
Gunn, J., Kawada, B., & Michas, P. (2019). Audit market concentration, audit fees, and audit quality: A cross-country analysis of complex audit clients. Journal Of Accounting and Public Policy, 38(6), 106693.
Gunn, J.L., Kawada, B.S. & Michas, P.N. (2019). Auditor Market Concentration, Audit Fees, and Audit Quality: A Cross- Country Analysis of Complex Audit Clients. Journal of Accounting and Public Policy, 38(6), 1-21.
Hassan, S.U. (2013). Financial Reporting Quality, Does Monitoring Characteristics Matter? An Empirical Analysis of Nigerian Manufacturing Sector. The Business & Management Review, 3(2), 147-161.
Hosseinniakani, S.M., Inacio, H. & Mota, R. (2014). A Review of Audit Quality Factors. International Journal of Academic Research in Accounting, Finance and Management Sciences, 4 (2), 316-331.
Huang, T.-C., Chang, H., & Chiou, J. R. (2015). Audit Market Concentration, Audit Fees, and Audit Quality: Evidence from China. Auditing: A Journal of Practice & Theory, 35(2), 121- 145.
International Auditing and Assurance Standards Board (2014). A framework for audit quality: Key elements that create an environment for audit quality, February 2014. New York: IFAC.
Jensen, M.C., & Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
Johnson, E., Khurana, I.K., & Reynolds, J.K. (2002). Audit-Firm Tenure and the Quality of Financial Reports. Contemporary Accounting Research, 19(4), 637-660.
Kallapur, S., Sankaraguruswamy, S. & Zang, Y. (2010). Audit Market Concentration and Audit Quality, Working Paper Gachibowli
Knapp, M.C. (1985). Audit Conflict: An Empirical Study of Perceived Ability of Auditors to Resist Management Pressure. The Accounting Review, 60 (2), 202-211.
Kyriakou, M.I. & Dimitras, A.I. (2018). Impact of Auditor Tenure on Audit Quality: European Evidence. Investment Management and Innovation, 15(1), 374- 386
Mgbame, C.O., Eragbhe, E & Nosakhare, P. O. (2012). Audit Partner Tenure and Audit Quality: An Empirical Analysis. European Journal of Business and Management, 4(7), 154-162.
Newton, N.J., Persellin, J.S., Wang, D., & Wilkins, M.S. (2015). Internal Control Opinion Shopping and Audit Market Competition.
Ojali, J. S., Adamu, I. A., & Shawai, A. S. (2023). Audit Committee Characteristics and Audit Delay among Nigerian Oil and Gas Companies. FUDMA Journal of Accounting and Finance Research [FUJAFR], 1(1), 136–156.
Ogbeide, I.E., Okaiwele, I. & Ken-Otokiti, D. (2018). Auditor Independence and Audit Quality. International Accounting and Taxation Research, 2 (1), 152-173.
Salau, A.O. & Ayoib, C.A. (2016). Audit Fees, Corporate Governance Mechanisms, and Financial Reporting Quality in Nigeria. DLSU Business & Economics Review, 26(1), 1-14.
Singer, Z. & Zhang, J. (2018). Auditor Tenure and the Timelines of Misstatement Discovery. The Accounting Review, 93(2), 315–338
Siregar,S.V., Amarullah, F., Wibowo, A. & Anggraita, V. (2012). Audit Tenure, Auditor Rotation, and Audit Quality: The Case of Indonesia. Asian Journal of Business and Accounting, 5(1), 55-74.
Soltani, B. (2007). Auditing- An International Approach, Trans-Atlantic Publications, Inc.
Velte, P. & stiglbauer, M. (2012). Audit Market Concentration and Its Influence on Audit Quality. International Business Research, 5 (11), 146-161.
Van-Raak, J. Peek, E., Meuwissen, R. & Schelleman, C. (2020). The Effect of Audit Market Structure on Audit Quality and Audit Pricing in the Private-Client Market. Journal of Business Finance and Accounting, 47(3-4), 456-488.
Willekens, M., Dekeyser, S., Bruynseels, L. & Numan, W. (2020). Auditor Market Power and Audit Quality Revisited: Effects of Market Concentration, Market Share Distance, and Leadership. Journal of Accounting, Auditing & Finance, 1–21.
Xiao, T., Geng, C. & Yuan, C. (2020). How Audit Effort Affects Audit Quality: An Audit Process and Audit Output Perspective. China Journal of Accounting Research
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Muhammad Isah Tahir, Abdulkarim Shaibu Alhassan, Godwin Emmanuel Oyedokun
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
The FUDMA Journal of Accounting and Finance Research (FUJAFR) operates a copyright policy that ensures a balance between author rights and wide dissemination of scholarly work.
1. Author Copyright Retention
Authors retain full copyright of their published work without restriction. Submission to FUJAFR does not transfer ownership of copyright to the journal.
2. License to Publish
By submitting a manuscript and upon acceptance, authors grant FUJAFR:
- The right to publish, reproduce, and distribute the article
- The right to identify itself as the original publisher of the work
This grant is non-exclusive, meaning authors are free to reuse their work in other contexts, provided proper acknowledgment of the original publication in FUJAFR is made.
3. Licensing of Published Content
All articles are published under the:
Creative Commons Attribution-NonCommercial License (CC BY-NC 4.0)
Under this license:
- Users may share and adapt the work for non-commercial purposes only
- Proper attribution to the author(s) and the journal is required
- Any commercial use requires explicit permission from the copyright holder
4. Author Reuse Rights
Authors are permitted to:
- Archive their published articles in institutional repositories or personal websites
- Share their work for educational and research purposes
- Reuse portions of their work in future publications (e.g., books or other articles), provided proper citation of the original publication is included
5. Third-Party Content
Authors are responsible for obtaining permission to use any third-party copyrighted material (e.g., images, tables, datasets) included in their manuscripts. Proper acknowledgment must be provided where required.
6. Attribution Requirement
All users of FUJAFR content must provide appropriate credit, including:
- Author name(s)
- Article title
- Journal name (FUJAFR)
- Year of publication
