The Impact of Blockchain Adoption on the Audit Quality of Financial Institutions in Nigeria

This study investigates the nexus between blockchain adoption and the audit quality of financial institutions within the unique and dynamic context of Nigeria's financial sector. The proliferation of blockchain technology presents a dual-edged sword for auditors: it promises enhanced transparency and data integrity, potentially improving audit quality, yet its inherent complexity may introduce new risks and skill gaps. Employing an ex-post facto research design, this paper utilizes panel data regression analysis on a sample of 151 listed financial institutions on the Nigerian Stock Exchange from 2010 to 2024. The dependent variable, audit quality, is proxied by discretionary accruals, estimated using the Modified Jones Model. The independent variable is blockchain adoption, measured as a binary variable based on corporate disclosures. Key control variables include Firm Size (FS), Industry Type (INDT), Firm Age (FA), Board Size (BS), Research and Development Expenditure (R&DE), CEO Characteristics (CEOC), and Ownership Structure (OWNS). The empirical results reveal that blockchain adoption has a statistically significant negative relationship with discretionary accruals, indicating that its implementation is associated with a substantial improvement in audit quality. These finding challenges arguments that the technology's complexity inevitably degrades audit standards, suggesting that in the Nigerian context, the benefits of transparency outweigh the challenges. The study also finds that CEO characteristics and firm size are significant determinants of both blockchain adoption and audit quality. The findings have profound implications for regulators like the Central Bank of Nigeria (CBN), auditing firms, and corporate boards, underscoring the urgent need for policy frameworks that encourage technological adoption while simultaneously fostering the development of technological expertise within the audit profession. This paper contributes to the scarce literature on technology's impact on auditing in emerging markets, providing crucial evidence for Nigeria, a burgeoning hub of financial innovation.