AUDIT INDEPENDENCE AND FINANCIAL PERFORMANCE OF QUOTED INSURANCE COMPANIES IN NIGERIA
Abstract
This paper investigates the effect of audit independence on the financial performance of quoted insurance companies in Nigeria. Audit independence was measured using audit tenure and audit fee, while financial performance was evaluated through net profit margin (NPM), return on assets (ROA), and earnings per share (EPS). Secondary data were extracted from the audited annual reports of 19 insurance companies listed on the Nigerian Exchange Group, covering the period from 2012 to 2023. The study employed descriptive statistics, correlation analysis, and panel least squares regression to analyze the relationships among variables, with model selection guided by the Hausman test. The findings revealed that audit fee had a positive and statistically significant effect on NPM and ROA, implying that higher audit investments enhance profitability and asset efficiency through more rigorous oversight and greater stakeholder trust. In contrast, audit tenure exhibited insignificant relationships with all financial performance indicators, suggesting that extended auditor engagements neither significantly enhance nor diminish financial outcomes. For EPS, both audit tenure and audit fee showed statistically insignificant effects, indicating that market-based or internal firm factors may play a stronger role in influencing shareholder earnings. The study concludes that audit independence remains critical to ensuring credible reporting and long-term investor confidence. It recommends that regulators encourage transparent audit fee structures, enforce reasonable auditor tenure limits, and promote periodic quality reviews to maintain independence without sacrificing audit effectiveness.
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Published in INTERNATIONAL JOURNAL OF ACCOUNTING, FINANCE AND TAXATION
ISSN: 3027-0378
This article appears in our peer-reviewed academic journal
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