An Assessment of Auditor’s Independence on the Quality of Financial Reporting: Evidence from Lagos State Parastatals

Abstract

This study investigated the effect of auditor's independence on the financial reporting quality of Parastatals in Lagos State, Nigeria. A survey was conducted to gather data on auditor's independence and a content analysis procedure was adopted to extract secondary data from the audited financial statement of the parastatals. Data were analyzed using binary logistic regression. The findings show that when an auditor alienates his personal interest from audit and his ability to issue a qualified audit opinion where necessary, have a statistically significant effect on improving both the fundamental and enhanced qualitative characteristics of financial reporting (FQC and EQC). Hence, the more an auditor allows his personal interests to becloud his judgement, the lower both the FQC and EQC of financial reporting. The outcome of reliance on the work of the internal auditors and auditor's rotation gave an inconclusive result. Therefore, rotation of auditors and the reliance on the findings of internal auditors promote the relevance and how faithfully represented the financial reporting are, while the EQC has no effect on auditor's independence. The study recommended that parastatals must place a premium on promoting auditors' independence in order to minimize audit failure and the credibility attached to the financial reports.

The Influence of Audit Committee Quality and Financial Reporting Quality: A Case Study of Reliance Ltd.

“…The company's Altman Z-score was 2.17, which indicates a company with good financial reporting quality. The company's audit committee also scored well on all variables used to measure audit committee quality (Okunola, 2021). The company's audit committee scored three or above on all variables to measure audit committee quality.…”