Auditor Independence, Audit Committee Effectiveness and Financial Reporting Quality of Listed Manufacturing Firms in Nigeria

Recurring instances of financial reporting failure and earnings management in Nigeria have intensified interest in the audit governance mechanisms expected to safeguard the reliability of corporate financial statements, yet evidence on which specific audit attributes actually improve financial reporting quality among listed manufacturing firms remains inconclusive. This study examined the effect of auditor independence and audit committee effectiveness on the financial reporting quality, proxied by accruals quality, of manufacturing firms listed on the Nigerian Exchange Group.
Anchored on Agency Theory, the study adopted an ex-post facto research design within a longitudinal panel framework. All fifty manufacturing firms listed on the Nigerian Exchange Group were studied on a census basis over the period 2015 to 2024, yielding 500 firm-year observations drawn from audited annual financial statements. Data were analysed using descriptive statistics, Pearson correlation, the Hausman specification test, and panel regression.
The Hausman test favoured the random effects estimator (χ² = 5.82, p = 0.3276). Auditor independence exerted a positive and significant effect on financial reporting quality (β = 0.276842, t = 3.83823, p = 0.0002), and audit committee effectiveness also exerted a positive and significant effect on financial reporting quality (β = 0.341882, t = 4.01177, p = 0.0001), with the model jointly explaining 57.82 per cent of the variation in financial reporting quality.
The study concludes that auditor independence and audit committee effectiveness are complementary governance mechanisms that both strengthen financial reporting quality, and recommends that listed manufacturing firms safeguard auditor independence from managerial influence and strengthen audit committees through the appointment of financially literate members.

Accounting

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