Moderating effect of audit quality on the relationship between internal governance mechanisms and financial reporting quality

Abstract

This study investigates the moderating effect of audit quality on the relationship between governance mechanisms and financial reporting quality of listed consumer goods firms in Nigeria. The study adopts a correlational research design as a guide. The population of the study consist of twenty-one (21) consumer goods firms that are listed in the NSE from 2012 to 2021 out of which seventeen 17 firms was used as adjusted population. Given the research design, multiple regression technique is employed as technique of data analysis. The study findings revealed that board composition and audit committee financial expertise when interacted with auditor size has significantly improved the quality of earnings there by preventing the devious tendencies of managers manipulating accruals. It is therefore recommended that shareholders should consider regulating the appointment of the nonexecutive to the maximum of 56% so as not to over plugged the board with the non-executive directors which may result to increase in costs. However, it is also advice that financial expert member’s appointment to the audit committee should not be jeopardize as such it is recommended that the proportion of the financial expert in the audit committee should not reduce if not increase.