Auditor Characteristics, Corporate Governance, and Audit Quality in Nigerian Banks: A Post-CBN Reform Analysis

This study analyzes the combined effect of auditor characteristics and corporate governance quality on audit quality in Nigerian commercial banks following the Central Bank of Nigeria's post-2014 governance reforms. The banking sector in Nigeria has experienced significant regulatory transformation, including enhanced board composition requirements, risk management standards, and external audit oversight provisions. Understanding how these reforms interact with auditor characteristics to influence audit quality is essential for assessing their effectiveness. This study uses panel data from 12 listed commercial banks for the period 2015 to 2023. Auditor characteristics examined include Big Four affiliation, auditor tenure, audit fees, and industry specialization. Corporate governance is measured using a composite index incorporating board independence, audit committee quality, and ownership structure. Audit quality is proxied by discretionary accruals and the incidence of regulatory sanctions for financial misstatement. Two-stage regression and system GMM estimation are employed. Results indicate that Big Four auditor affiliation and banking sector specialization are significantly associated with higher audit quality. Corporate governance quality moderates the auditor-quality relationship, with strong governance amplifying the positive effects of high-quality auditors. Audit tenure beyond eight years is negatively associated with quality, even for Big Four engagements. The study concludes that auditor characteristics and governance quality are complementary determinants of audit quality in Nigerian banks. It recommends joint CBN and FRCN oversight of bank audit engagements to enforce consistent quality standards.

Keywords: auditor characteristics, corporate governance, audit quality, CBN reforms, Nigerian banks.