EFFECT OF AUDIT QUALITY ATTRIBUTES AND IFRS ADOPTION ON FINANCIAL REPORTING QUALITY OF LISTED MANUFACTURING FIRMS IN NIGERIA

The accounting and auditing profession in the last two decades have been in the limelight after the fall of many multinational companies. The fall of these companies were examined by many researchers and were linked to audit quality deficiencies and inadequacies of financial reporting standards. To forestall future occurrences the international financial reporting standard (IFRS) adoption gained global momentum as it is expected to enhance all the proxies of financial reporting quality. Similarly, the International Auditing and Assurance Standards Board (IAASB) promulgated new set of auditing standards in an attempt to regain public confidence. This is because audit quality is an essential element in achieving global financial stability and high-quality financial reporting. This study examined the effect of audit quality attributes (proxy by audit report timeliness, audit fees and audit firm size) and IFRS adoption on financial reporting quality (proxy by accrual and real earnings management) of 40 listed manufacturing firms on the Nigerian Exchange Group (NGX). The study adopted a Correlational research design using secondary data for the period 2007 to 2021. Panel data technique was employed, while fixed and random effects model were used for estimation. Descriptive Statistics, Pearson correlation coefficient and multiple regression analysis were used for analysis to determine possible link between the variables identified. The accrual earnings management (AEM) was measured by the Yoon, Miller & Jiraporn (2006) model and the real earnings management (REM) measured by the Roychowdhury (2006). The regression results reveal a R2 of 39% and 41% which suggests AEM and REM are close substitutes. Audit report timeliness (0.0012 and 0.0003) positive and statistically significant. This suggests a positive impact on financial reporting quality and the length of time from a company’s accounting year end to the date of the auditor report can determine the FRQ of listed manufacturing firms in Nigeria. Audit fee (-0.0604 and – 0.0418) and Audit firm size (-0.9163 and -0.0096) have negative correlation and are also statistically not significant to financial reporting quality. The adoption of IFRS for AEM and REM (-0.5436 and 0.0091) however, they have P- values which are positive and significant at 0.05 suggesting significant association of manufacturing firms listed in NGX negatively affects AEM but positively affects REM. Hence, the study recommends the enhancing the implementation and oversight of IFRS standards and ensuring that the regulations are not only adhered to but also comprehensively understood, and any unintended consequences are mitigated.