This study examined the effect of audit quality on the failure risk of listed deposit money banks in Nigeria over the period 2009–2024. The study was motivated by the recurring failures of banks despite the issuance of unmodified audit opinions, raising concerns about the effectiveness of external audit mechanisms in promoting financial stability. Bank failure risk was measured using the Bank Z-score (distance-to-default model), while audit quality was proxied by audit firm size, audit report timeliness, audit tenure, audit fees, joint audit, audit committee diligence, and auditor opinion type. An ex post facto research design was adopted using secondary data obtained from the audited annual reports of eleven listed deposit money banks, resulting in 176 bank-year observations. Descriptive statistics, correlation analysis, and panel regression techniques were employed. Following diagnostic tests, the Driscoll–Kraay estimator was adopted to correct for heteroskedasticity, autocorrelation, and cross-sectional dependence. The findings revealed that audit firm size exerted a positive and statistically significant effect on Bank Z-score, indicating that banks audited by Big Four audit firms exhibited greater financial stability and lower failure risk. Audit report timeliness had a statistically significant negative effect on Bank Z-score, implying that prolonged audit reporting delays increased bank failure risk. However, audit tenure showed no statistically significant effect on bank failure risk. The study concludes that audit quality is not uniformly effective in mitigating bank failure; rather, specific dimensions, particularly audit firm size and timely audit reporting, contribute more substantially to banking sector stability. The study recommends that bank regulators and policymakers strengthen audit quality by encouraging the engagement of technically competent audit firms, promoting timely completion of audit engagements, and emphasizing audit effectiveness over procedural compliance. These measures will enhance financial reporting credibility, strengthen market confidence, and improve the resilience of Nigeria's banking sector
Effiong et al. (Wed,) studied this question.