Audit Firm Size and Earnings Restatement of Quoted Consumer–Goods Manufacturing Firms in Nigeria
The notion that high audit quality might increase financial reporting credibility is motivating investors and other concerned users of accounting information in looking for audit quality indicators, with which audit performance can be evaluated. Consequently, this study tested audit firm size as a potential indicator of audit quality by examining its explanatory capacity of earnings restatement using listed consumer-goods manufacturing firms as the study population. Secondary data were extracted from the annual reports of 13 quoted consumer-goods manufacturing companies covering the study period from 2012 to 2018. A Logit regression equation was utilized to specify a stochastic model of earnings restatement in terms of audit firm size. On the final analysis, it is the finding of this study that, there is significant negative relationship between auditor firm size and earnings restatement of quoted consumer-goods manufacturing companies in Nigeria, thus confirming the experience and reputation hypotheses of audit theory. In the light of the findings, it is the recommendations of this study that, Financial Reporting Council of Nigeria should mandatory auditor rotation on big-4-to-non-big-4 pairing basis in order to sustain the positive impacts of the big-4 audit firms in the Nigerian audit market.
