Audi CharacteristicsAnd Financial Reporting Quality Of Listed Pharmaceutical Firms In Nigeria

Abstract

The Audited Financial Reports place value and credibility on financial statements before the 
interested users. This paper, therefore, investigates the effect of audit characteristics on the 
financial reporting quality of listed pharmaceutical firms in Nigeria. Samples were obtained for 
a period of 10 years (2012-2021) from listed pharmaceutical firms in Nigeria. The study 
employed, auditor’s independence, audit fees, audit firm size, and auditor’s tenure to measure the 
audit characteristics as an independent variable while financial reporting quality was measured in 
line with IFRS disclosure checklist. The purposive sampling technique was used to select 7 listed 
pharmaceutical companies on the Nigerian Exchange Group (NEG) market. Data for the study 
was extracted from the annual reports and accounts of the sampled companies from 2012 to 2021 
and analyzed using descriptive and regression analysis. Specifically, to examine the cause-effect 
relationships between the dependent variables and independent variables as well as to test the 
formulated hypotheses, the study used a panel hierarchical regression analysis. The study 
concludes that an increase in the engagement of an auditor on only audit services by the listed 
pharmaceutical firms will insignificantly decrease financial reporting quality during the period 
under study. It also concludes that an increase in the amount paid to the auditor for audit 
engagement will significantly decrease financial reporting quality during the period under study. 
At the same time, engaging the services of big4 auditors will significantly decrease financial 
reporting quality during the period under study. Finally, it was concluded that engaging the 
services of auditors for over 5 years will significantly decrease financial reporting quality during 
the period under study. Based on the findings of this study, it was carefully recommended that 
considering the competition among Nigerian audit firms, managers and partners of audit firms 
can form specialized teams to increase the quality of financial reporting. Investors concerned 
about the quality of financial reporting are advised to consider the audit characteristics when 
making a decision.