Moderating effect of leverage on the relationship between audit committee and audit quality of listed emerging firms in Nigeria

Abstract

This study investigates the moderating effect of leverage on the relationship between audit committee characteristics specifically oversight, independence and communication and audit quality among listed emerging firms in Nigeria. Using Agency and Resource Dependency theories as the theoretical framework, the study adopts an ex-post facto research design with secondary data collected from 25 emerging firms listed by Business Elites Africa from 2022 to 2025. Logistic regression analysis was employed using STATA version 14.0 to test the hypothesized relationships. Findings reveals that audit committee oversight, independence and communication each have a significant positive effect on audit quality. However, leverage negatively moderates these relationships, suggesting that higher financial leverage weakens the positive effects of audit committee functions on audit quality. This study concludes that while audit committees are crucial for enhancing audit quality, firms with high leverage are
more vulnerable to compromised audit integrity despite strong committee structures. The research recommends strengthening audit committee mechanisms through enhanced training, regulatory reforms and independent financial oversight, particularly in high-leverage firms. The study contributes to corporate governance literature by highlighting leverage as a significant moderating factor in emerging economies.