Audit Reporting Quality And Audit Fee

Abies Princess Ogieriakhi, Olusola Gabriel Oladapo, Tawfique Abdul-karim, Bolouboye Micah Eradiri, Bioluwatife Oluwaferanmi Oke, Afeez Opeyemi Shoebi

Abstract


This study examines the relationship between audit reporting quality and audit fees in Nigeria, focusing on key determinants such as audit firm size, client risk, and firm profitability. Grounded in agency theory, the study highlights how audit fees serve as a mechanism to mitigate agency conflicts and enhance financial transparency. Using an ex-post facto research design, data were collected from 52 listed firms on the Nigerian Exchange Group (NGX) between 2018 and 2020. A multiple regression analysis was conducted using E-Views 8.0 to evaluate the impact of independent variables on audit fees. The findings reveal that audit firm size significantly affects audit fees (β = 0.0177, p = 0.021), indicating that larger firms charge higher fees due to their reputation and credibility. Similarly, client risk has a positive and significant impact on audit fees (β = 0.2061, p = 0.027), suggesting that riskier firms incur higher audit costs due to increased scrutiny and litigation risks. Additionally, client firm profitability significantly influences audit fees (β = 0.0025, p = 0.009), implying that more profitable firms pay higher fees due to their complex financial structures. The model's R-squared value (0.1138) indicates that while these variables contribute to audit fee determination, other unexplored factors may also be relevant. The study underscores the need for stronger regulatory oversight to ensure that high audit fees correlate with improved audit quality rather than compromised auditor independence. Future research should explore longitudinal trends in audit fee structures and their implications for financial reporting credibility in Nigeria.


Keywords


Audit fees, Audit reporting quality, Auditor independence, Agency theory, Corporate governance, Financial transparency.

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DOI: http://dx.doi.org/10.52155/ijpsat.v50.1.7128

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