EFFECT OF AUDITOR INDEPENDENCE ON LIQUIDITY MANAGEMENT IN COMMERCIAL BANKS IN NIGERIA
Keywords:
Audit Fees, Audit Firm Size, Audit Firm Tenure, Auditor Competence, Current RatioAbstract
This study examined the effect of auditor independence on liquidity management in Nigerian commercial banks. Auditor independence is proxied by audit fees, audit firm tenure, audit firm size, and auditor competence, while liquidity management is measured by the current ratio. Data were collected from 10 commercial banks over the period 2014 to 2024, resulting in 110 observations. Using panel data analysis with fixed effects regression, the results reveal that audit fees (β = 0.0022, p < 0.01) and audit firm size (β = 0.0420, p = 0.052) have positive effects on the current ratio, while audit firm tenure (β = 0.0043, p = 0.305) and auditor competence (β = 0.0046, p = 0.764) do not show significant effects. The model explains 79.0% of the variance in liquidity management (R² = 0.790). Anchored on agency theory, the findings suggest that stronger auditor independence enhances liquidity oversight and bank stability. Recommendations include strengthening regulatory frameworks for auditor selection and fee structures to improve financial reporting quality and liquidity practices in Nigerian banks.
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