Effect of audit quality on financial reporting transparency

Abstract

The study examined the effect of audit quality on the financial reporting transparency of quoted insurance firms in Nigeria. Audit quality were proxied using key determinants of audit quality like; audit committee size, audit committee independence, audit fees, audit committee expertise and audit timeliness, while financial reporting transparency was proxied using discretionary accruals measured using modified Jones Model. The study adopted post facto research and longitudinal research design. The panel data collected from the annual reports of insurance firms quoted on the Nigerian Exchange Group between 2015 and 2024. Data collected were analysed using ordinary least square regression analysis. Preliminary analysis like descriptive statistics, correlation analysis and the Hausman effect test. The findings revealed that audit attributes variables jointly drive 55% of the financial reporting transparency among insurance firms. The findings from the specific objectives reveals that audit committee expertise, audit committee independence, and Audit fees has positive but insignificant effects on financial reporting transparency, while audit committee size and audit timeliness showed a positive but insignificant effect on the financial reporting transparency of insurance firms in Nigeria. The results indicate that audit committee variables positively affect the level of financial reporting transparency. The study recommends among other that insurance firms strengthen their audit committee variable like audit committee expertise, audit committee size, and audit committee independence, as these would significantly affect the reporting quality, enhance transparency, and accountability thereby reducing agency crisis.

Keywords: Audit Committee Expertise, Audit Committee Size, Audit Committee Independence, Audit Quality, Financial Reporting Transparency.