THE INFLUENCE OF AUDITOR’S TYPE ON THE QUALITY OF FINANCIAL REPORTS OF MANUFACTURING FIRMS IN NIGERIA
1.1 BACKGROUND OF THE STUDY
Over the years, the influence of auditors on financial reports of firms or companies all over the world has become a source of concern to users of financial
information’s such as investors, shareholders, stakeholders etc. In view of the importance of quality financial reporting, the International Federation of
Accountants (IFAC) and it audit arm, International Auditing and Assurance Standards Boards (IAASB) stated that audit service is an assurance service that the
financial statement prepared by the managers is true and fair and free from intentional and unintentional errors and misstatement and, that it also conforms
to the relevant rules and regulations guiding the preparation and presentations of accounting information’s. According to (IAASB 2013) global financial
stability is supported through high quality reporting which can be achieved thought high quality auditors type.
Auditors type can be seen as an audit firm made up by a group of auditors or a single auditor with the sole responsibility ofexaming books of accounts
vouchers of organization in order to detect fraud, errors, misstatement and rendering professional services. The auditors type are:
1. The Big4 auditors
2. The Non Big4 auditors
The ability of audit firm to provide high audit quality, capable of producing high financial reporting quality is attributed to certain features of the auditor’s
firm. These features are:
1. Auditors independence
2. Auditors compensation
For the purpose of this study our concern will be drawn to just one of these features which is the “Auditors type”.
The auditors type is conceived as financially independent and highly experienced from any pressure from the client’s “to look the other way” in their role of
discovering irregularities. Moreover, Big4 auditors have more to lose should a scandal arises in that their brand names and reputation as more valuable
compared to the Non-Big4 auditors.
According to Becker, Defond, Jiambalvo and Subra manian (1998) is o
the opinion that, the Big4 auditors have shown to have higher accrual quality
financial report while the lowest level of quality occurs when a single auditor is responsible for the audit engagement.
Therefore, this study is motivated by critical role that the auditor’s type influences the quality of financial report of manufacturing firm in Nigeria.