AUDIT FIRM CHARACTERISTICS AND FINANCIAL PERFORMANCE OF QUOTED INSURANCE COMPANIES IN NIGERIA
Abstract
This study examines the relationship between audit firm characteristics and the financial performance of quoted insurance companies in Nigeria. Specifically, audit firm size and audit firm rotation were used as measures of audit firm characteristics, while financial performance was assessed using net profit margin (NPM), return on assets (ROA), and earnings per share (EPS). Data were obtained from the audited annual reports of 19 insurance companies listed on the Nigerian Exchange Group for the period 2012–2023. Descriptive statistics, Pearson correlation, and panel least squares regression analyses were employed, with the Hausman test determining the appropriate model specifications. The results revealed that both audit firm size and audit firm rotation exhibited statistically insignificant relationships with all measures of financial performance. Audit firm size showed a positive but insignificant association with ROA and EPS, and a negative insignificant link with NPM, suggesting that large audit firms may contribute to better governance and credibility without necessarily improving short-term profitability. Similarly, audit firm rotation showed weak and insignificant effects on NPM, ROA, and EPS, indicating that frequent changes in auditors do not directly enhance performance outcomes. The study concludes that while audit firm characteristics may indirectly strengthen corporate transparency and stakeholder confidence, they are not decisive predictors of financial performance in Nigeria’s insurance sector. It recommends that regulators balance audit rotation requirements with continuity of expertise and that insurance firms prioritize auditor competence and industry specialization over firm size alone.
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Published in BUSINESS AND FINANCE JOURNAL
ISSN: 988-47878
This article appears in our peer-reviewed academic journal
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