Effect of Audit Quality on Financial Performance of Deposit Money Banks in Nigeria

This study examined the effect of audit quality on the financial performance of deposit money banks in Nigeria. The need for high quality audit has become a global concern following corporate scandals involving Enron; World Com; Global Crossing, and Cendant. Again, Nigeria has experienced some cases of failed banks such as: Savanna Bank, All states Trust Bank, Assurance Banks of Nigeria and City Express Bank. Following the use of secondary sources of data collection, the study adopted ex-post facto research design. The population of the study comprised all the listed deposit money banks on the Nigerian stock exchange while the sample size consisted of thirteen (13) deposit money banks based on judgmental selection method. The data for the study were sourced from the annual reports and consolidated financial statements of the selected deposit money banks. The order of integration found during unit root test justified the use of ordinary least squares (OLS) regression method for hypotheses testing using the statistical Package for social sciences (SPSS 20). The study revealed that audit fee has a positive and statistically insignificant effect on the net income of deposit money banks in Nigeria. Further findings reveal that audit fee has a statistically significant effect on both earnings per share and liquidity of deposit money banks in Nigeria. The study recommends that the banks should go beyond their external audit to strengthen the internal audit of the banks. This is imperative because reliance on external audit alone has not proven to influence the net income of the banks despite the fee paid get quality audit services; again, the banks should take note paying the right audit fee entrenching quality audit service. This is because the benefit of quality services results reflects in the confidence of investors and customers which spurs the liquidity base of the banks and as a result increases the net income and earnings on shares invested.