Effect of External Auditor Independence on Financial Reporting Quality in Companies in Ebonyi State

Concerns about the independence of external auditors in Nigerian companies have grown following high-profile audit failures, with stakeholders increasingly questioning whether existing regulatory safeguards adequately protect the objectivity of audit engagements and the reliability of published financial reports. This study examined the effect of external auditor independence on financial reporting quality in companies operating in Ebonyi State, with focus on firms registered with the Companies and Allied Matters Act in the state. The study was anchored on the independence theories in auditing, particularly the concept of independence in fact and independence in appearance as determinants of audit credibility. A survey research design was adopted, with a population of 218 finance directors, external auditors, and company shareholders. A sample of 141 was drawn using stratified random sampling. A self-administered questionnaire was used as the primary data collection instrument, and data were analyzed using multiple regression analysis. Findings showed that auditor rotation, absence of non-audit service provision, and audit committee oversight were positively and significantly associated with improved financial reporting quality dimensions including accuracy, neutrality, and faithful representation. Long auditor tenure was negatively associated with reporting quality. The study concluded that external auditor independence is a critical structural safeguard for financial reporting quality in Ebonyi State companies. It was recommended that the Financial Reporting Council of Nigeria should enforce mandatory auditor rotation every five years and restrict non-audit services to prevent independence compromise.

Keywords: Auditor independence, financial reporting quality, audit tenure, audit committee, external audit