AUDIT MARKET CONCENTRATION AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study explores audit market concentration on audit quality in Nigerian deposit money banks. Audit market concentration is approximated by relative audit market concentration and absolute audit market concentration, and audit quality is approximated by audit fees and auditor independence. An ex-post facto research design is used in the study, which is appropriate to investigate variables across time. The population consisted of the thirteen (13) banks for the period 2015 to 2024. Since the population was small, statistical sampling was not employed; instead, all thirteen banks were included in the study, so it was a census. Data were gathered from the yearly financial reports of the said banks for the ten years. Panel regression via the ordinary least squares technique was employed to test the hypotheses. Findings show that audit market concentration has a significant positive effect on audit quality in Nigerian deposit
money banks. Specifically, absolute audit market concentration has a significant negative relationship with audit fees, while relative audit market concentration also influences audit fees significantly in a negative manner. More so, absolute and relative audit market concentration exhibit positive but statistically non-significant relationships with auditors’ independence. The study recommends that the regulators should consider imposing market share caps on audit firms—measured as the range of client engagements over five years—to counter the absolute market concentration in the banking sector. Besides, public policy must take a keen interest in the impact of absolute market concentration on audit fees and auditor choice to secure audit quality.