The Impact of Client Economic Power and Value on the Independence of Auditors in Nigeria: Quantitative Analysis Comparing Financial Strength with Audit Remuneration
Abstract
This paper looks into the possibility that the Economic power possessed by clients might affect the level of external auditor’s independence in Nigeria. It explores the possibility that the comparability of financial strength of clients to that of audit firms could lead to intimidation threat. The study makes use of the annual report of 6 out of the Most Valuable entities in Nigeria as evaluated and published by Nigeria Bulletin in 2014. The study carried out a linear regression analysis of the relationship between audit remuneration and firm size and total administrative expenses. The result showed that audit remuneration has a positive significant relationship with administrative expenses, although only about 40% change in administrative expense could be attributed to audit fee as depicted by the coefficient of determination (R2), the other result showed a positive significant relationship between audit remuneration and firm size, with very high correlation coefficient. This led to the conclusion that the financial strength of client has a strong impact on the fortune of auditor, which could affect the moral stance of auditors; it is therefore recommended that auditor maintain their independence principle no matter the circumstance.
Keywords: Audit Independence, Audit Remuneration, Firm Size, Auditor-Client Relationship.
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ISSN (Paper)2222-1697 ISSN (Online)2222-2847
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