AUDIT QUALITY AND RETURN ON ASSETS IN LISTED INSURANCE COMPANIES IN NIGERIA – International Journal of Social Sciences and Management Review

AUDIT QUALITY AND RETURN ON ASSETS IN LISTED INSURANCE COMPANIES IN NIGERIA

Authors: Idowu Afolasade Florence, Abiodun-Afolabi Fadekemi Omogbonjubolanle, Eso Ayoola Abimbola & Oyedokun, Godwin Emmanuel

ABSTRACT

Financial performance of any firm is a function of continuous improvement, while audit quality is essential in influencing financial performance by ensuring the accuracy and reliability of financial reports key factors for stakeholders’ decision-making and corporate transparency. In Nigeria’s insurance sector, financial performance, particularly Return on Assets (ROA), serves as a fundamental indicator of success. This study examines the impact of audit quality on the financial performance of listed insurance companies, focusing on audit fees, audit independence, and audit firm size. Using an ex-post facto research design, secondary data was collected from 22 listed insurance firms between 2017 and 2021. Descriptive statistics and multiple regression analysis were employed to analyze the relationship between audit quality and ROA. The results reveal that audit fees have a significant positive effect on ROA (β = 3.71, p < 0.05; F = 4.37, p < 0.05), while audit independence also positively influences ROA, though less strongly (β = 4.89, p < 0.05; F = 0.67, p < 0.05). In contrast, audit firm size has a significant negative impact on ROA (β = -0.24, p < 0.05; F = 11.90, p < 0.05). The study’s models were validated by Durbin-Watson statistics, indicating minimal autocorrelation. These findings underscore the importance of audit quality, particularly audit fees and independence, in enhancing financial performance, while larger audit firms may hinder it. The study offers key insights for auditors, regulators, and stakeholders focused on improving financial transparency and the overall performance of insurance companies.

Keywords: Audit Quality, Return on Assets, Audit Fees, Audit Independence, Audit Firm Size, Insurance Companies

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