Impact of Auditors Independence on Financial Reporting Quality of Listed Deposit Money Banks in Nigeria

ABSTRACT This research was carried out in order to examine the impact of auditors' independence on financial reporting of listed deposit money bank Nigeria. The study aimed at examining, investigating and ascertaining the interaction between audit quality and corporate financial reporting in Nigeria deposit money bank. Hence, the study is a movement towards improving the quality of audit practice in Nigeria. In conducting this research uses secondary data was generated from the financial statements of six (6) deposit money bank for the period of five (5) years which make a total of 30 annual reports of deposit money bank quoted on the Nigerian Stock Exchange. The data gathered were used to test the research hypotheses and answer some of the research questions. The study found a significant and positive relationship between audit quality and the quality of financial reporting. Multiple regression analysis was used to establish the effect of auditors' independence on financial reporting quality over the stated period. Correlation analysis was done to establish whether there was a relationship on the variable of the study. The findings show that, since client, audit tenure and audit incentives possess a positive coefficient, it reveals that deposit money banks in Nigeria tend to have a positive financial reporting quality due to auditors independence. Conclusively, the auditors' independence is at a perfect level and therefore will leads to a very sound financial report. Base on the findings the study recommends, against this backdrop that audit firms should charge reasonable fees that will cover their audit assignment so as to be able to carry out a thorough audit work. In light of this, low balling of audit fee should be discouraged. The Financial Reporting Council of Nigeria (FRC) and other regulatory bodies should increase the three years' mandatory professional requirement for auditors so as to encourage longer auditor tenure thus improving the working relations between the auditors and firm and enhance better understanding and client industry experience. This research focused on auditors' independence and financial reporting of deposit money banks in Nigeria. Further research can investigate a wider range and numerous sectors / industries using Auditor's Status and Auditor's Report-Lag as indicators for auditors' independence.