Audit Quality as a Shield Against Financial Malfeasance: Empirical Evidence on Fraud Prevention and Detection from Nigeria’s Deposit Money Banks

This study provided novel empirical evidence on the comparative effects of two core Audit-quality dimensions—Audit Independence and Audit Competency—on fraud prevention and detection (FPD) in Nigeria’s Deposit Money Banks (DMBs), an under-explored existing-market context. Anchored in Agency Theory and Human Capital Theory, we interrogated the assumption that structural safeguards (Independence) are equally or more effective than professional expertise (Competency) in curbing financial malfeasance. Using an ex-post facto design, we integrate primary survey data from 350 Audit and risk professionals across 20 systemically important DMBs with secondary data (2014–2023). Reliability was high (Cronbach’s α > 0.85); validity was supported via exploratory factor analysis. Hypotheses were tested using bootstrapped regression (5,000 resamples) and covariance-based Structural Equation Modelling (SEM) in AMOS. Findings showed that Audit Competency had a significant positive effect on FPD (β = 0.377, p < 0.001), while Audit Independence is statistically insignificant (β = 0.072, p = 0.111). SEM exhibits excellent fit (CFI = 0.928; RMSEA = 0.042; SRMR = 0.036) and confirms no indirect effect of Independence via Competency (β = 0.021, p = 0.156). We challenged conventional theory by demonstrating that, in high-fraud, weak-enforcement environments, human-capital attributes—technical proficiency, forensic expertise, and continuous training—outperform structural Independence in achieving fraud resilience. Originality lies in dual-method validation, sector-specific focus on systemically important banks, and reframing Audit-quality debates toward competence-centric regulation. Policy recommendations include integrating forensic Auditing into training, Competency-based licensing, and updating corporate governance codes to elevate technical capacity as a fraud-control lever.