The study investigated the impact of audit competition (AC) on audit quality (AQ) of quoted Nigerian Deposit Money Banks (NDMBs). A longitudinal research design was used alongside secondary data sources. Specifically, the study focused on the banking sector. The population consisted of 12 NDMBs listed on the Nigerian Exchange Group (NGX) as of December 31, 2023. A census sampling technique was used to accommodate all listed NDMBs. Data were obtained from audited annual reports, NGX, and Factbooks covering the period from 2011 to 2022, and were analysed using both descriptive and inferential statistics to ensure robustness of the estimates. The empirical findings indicate that AC proxies: market concentration (t = -8.81, Prob 0.05) and client mobility (t = -12.44, Prob 0.05) show a negative and statistically significant relationship with absolute discretionary accruals (ADA), which implies that increased AC is associated with reduced discretionary accruals and leads to improved AQ. Similarly, Big Four (t = -22.02, Prob 0.05) and firm growth (t = -9.97, Prob 0.05) reveal significant negative associations with ADA. The study concludes that AC has a negative and significant effect on AQ among NDMBs. The study suggests that increased competitive pressures within the audit market may compromise the quality of audit services, potentially due to fee competition and reduced audit effort. The study has implications for policymakers and institutional regulators in designing audit market structures that promote both competition and AQ.
Oladejo et al. (Tue,) studied this question.