Effect of Audit Quality on Financial Reporting Quality of Listed Deposit Money Banks in Nigeria

This study investigates the effect of audit quality on the financial reporting quality of listed deposit money banks in Nigeria between 2014 and 2025, with Financial Reporting Quality (FRQ) serving as the dependent variable. The specific objective was to assess how Audit Firm Size (Big4 vs Non-Big4), Audit Tenure, Audit Independence (measured by audit fees ratio), Audit Committee Size, and Audit Committee Financial Expertise influence FRQ. Using panel data obtained from five listed deposit money banks and employing panel least squares regression analysis, the study found that four of the five audit quality variables had statistically significant effects on FRQ. Audit Firm Size (β = -0.0155, p = 0.8011) exhibited an insignificant negative effect, suggesting that audit firm brand alone does not significantly influence reporting quality. In contrast, Audit Tenure (β = 0.0014, p = 0.0000), Audit Independence (β = 0.2269, p = 0.0047), Audit Committee Size (β = 0.0084, p = 0.0000), and Audit Committee Financial Expertise (β = 0.5259, p = 0.0000) all showed statistically significant positive relationships with FRQ, indicating that stronger audit engagement structures and governance mechanisms enhance the quality of financial reporting. Descriptive statistics revealed generally high and stable levels of audit quality and financial reporting quality across the sampled banks, with limited variability in key governance indicators, suggesting a relatively standardized regulatory environment within the Nigerian banking sector. The regression results further indicate strong explanatory power of the model, confirming the importance of internal governance structures in shaping financial reporting outcomes. The findings suggest that improving audit committee effectiveness and ensuring auditor independence are more critical determinants of reporting quality than reliance on audit firm size alone. It is concluded that while audit quality significantly influences financial reporting quality, Nigerian deposit money banks should prioritize governance strength and auditor engagement quality to sustain transparency, accountability, and financial reporting credibility.