The Impact of Audit Quality on the Share Prices of Quoted Companies in Nigeria

Abstract

This study is used to determine whether Audit Quality has any significant impact on and relationship with Market Value per Share of companies in Nigeria. Archival data were extracted from annual reports of 57 companies quoted on the Nigerian Stock Exchange (NSE) between 2006 and 2011. Audit Quality was estimated using Audit Firm Size, Audit Fees, Auditor Tenure and Audit Client Importance. Market Price per Share (MPS) was derived directly from CSCS Cash – Craft.  Multiple regression analyses were conducted on the data. The results of the tests show that Audit Quality exerts significant influence on the MPS of quoted companies in Nigeria. In order to improve the quality of audit and minimize earnings manipulations by firms in Nigeria, we recommend that regulatory agencies -  professional  accountancy bodies, Financial Reporting Council of Nigeria, the National Assembly, and  Securities and Exchange Commission should issue authoritative standard and  framework for audit quality; companies should improve their earnings quality only through sales growth, cost control and cost reduction strategies; companies in Nigeria should present distinct statements of earnings quality while auditors should conduct earnings quality assessment and issue Integrated Audit Quality Assurance Report by adapting or adopting current best practices statutorily backed by earnings monitoring of companies in Nigeria.  

Keywords: Audit Quality, Earnings Reports, Financial Statements, Market price Per Share