Audit Firm Attributes and External Auditors’ Switching Behaviour of Insurance Companies in Nigeria

Abstract:

Auditor replacement has been a critical issue in research to be solved in order to enhance the quality of audit reports. This study investigated the nexus between audit firm characteristics and external auditors’ switching behaviour of insurance companies in Nigeria. The specific objectives include the relationship between audit delay, audit tenure, audit fees, audit client size and audit firm size on audit switching. The study employed ex post facto and correlational research designs with a population of forty-seven (47) insurance companies. The study used the Taro Yamene formula to determine the sample size of forty-two (42) insurance companies and data was collected from the financial reports of sampled companies. The secondary data obtained from the annual reports were analysed using univariate, bivariate and multivariate analysis. The multiple regression analysis revealed that audit delay negatively and significantly impacts on audit switching of listed insurance companies in Nigeria; audit tenure negatively and significantly impacts on audit switching of listed insurance companies in Nigeria; audit fees positively and significantly impact on audit switching of listed insurance companies in Nigeria; audit client size negatively and insignificantly impact on audit switching of listed insurance companies in Nigeria; audit firm size positively and significantly influence external auditor switching of listed in insurance firms in Nigeria. On the basis of the findings, the study concluded that audit firm characteristics influence the level of external auditor switching of listed insurance companies in Nigeria. Hence, the study recommended amongst others, that companies should conduct proper short and long term effects of audit delay, audit tenure, audit fees, audit client size and audit firm size on external auditors replacement before selection and engagement of new auditor because each wrong decision might affect audit quality. The implication of this study was to improve the research on the relevance of external auditors’ switching because of the decision of the firms in defining audit firm services and audit quality.