AUDIT QUALITY AND ACCOUNTING GOING CONCERN OF LISTED MANUFACTURING COMPANIES IN NIGERIA: ALTMAN Z-SCORE APPROACH
Keywords:
Accounting going concern, Altman Z-score approach, Audit failure, Audit quality, financially distressed, financially healthy, Joint AuditAbstract
The deluge of audit failure in the world (Nigeria inclusive), has brought great disappointment to Users of financial reports, making audit quality the subject of focus. The collapse of 83 companies listed on the Nigerian Exchange Group, from which 65 were manufacturing companies in the space of 11 years, 2012-2022, is worrisome and thus questions the quality of the audit performed by the auditors on those financial statements. In line with these problems, this study examined the effect of audit quality on accounting going concern of listed financially distressed and healthy manufacturing companies in Nigeria from 2012 to 2022. The study employed ex-post facto research design. The secondary data for the 12 financially distressed and 12 financially healthy listed manufacturing companies sampled were sourced from the Nigerian Exchange Group, facts books and related companies’ Annual Financial Reports for the periods covered in the study. In determining how audit quality affects the accounting going concern of listed financially distressed and healthy manufacturing companies in Nigeria using the Altman Z-score approach as a yardstick for comparison. Particularly, pre-regression analysis which included descriptive statistics analysis, correlation analysis, and normality of data analysis were conducted. The P-values of the parameters obtained from, the mixed effect and the random effect regression analysis technique were used to test the financially distressed and financially healthy manufacturing companies’ hypotheses respectively. Notably, the outcome from the panel regression estimations revealed that: hiring the services of a Big four audit companies significantly improved the going concern status of listed manufacturing companies in Nigeria be it financially healthy or financially distressed; the effect of joint audits on accounting going concern of listed manufacturing companies in Nigeria is mixed: while it was insignificant for financially distressed companies, it was significant for financially healthy companies during the period. The study concluded that the effect of audit quality on accounting going concern should be juxtaposed with the financial status (distressed/healthy) of the companies, to obtain a more robust and unique solution to problems faced by listed manufacturing companies in Nigeria. The study recommended among others that listed manufacturing companies in Nigeria should engage the services of Big Four audit companies especially as the services of a Big Four audit companies significantly improve the financial health status of both financially distressed and financially healthy manufacturing companies in Nigeria.
Downloads
Published
Issue
Section
License
Copyright (c) 2023 Journal of Global Accounting
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Articles submitted to JOGA should not have been published or are currently under review by another Journal. Kindly see the guide for the preparation of the manuscript for details. Successful submission of articles by author(s) for publication clearly implies that the work is not an infringement of any existing copyright warranty as JOGA reserves the right to be indemnified by the author(s) where any breach of such warranty is proven. For ease of dissemination and to ensure proper policing of use, papers and contributions become the legal copyright of JOGA once published unless otherwise agreed.
Permission clearance should be obtained by the author(s) where applicable for the use of any content of interest not originally created by them. This must be done before the submission of the article to JOGA. Failure to do so may lead to a lengthy delay in publication, as JOGA is unable to publish any article which has permissions pending. Thus, the rights JOGA requires are:
- Non-exclusive right to reproduce the material in the article or book chapters.
- Print and electronic rights.
- To use the material for the life of the work (for instance, there should be no time restrictions on the re-use of material).
Where tables, figures or excerpts of more than 250 words are reproduced from another source, it is expected that:
- Author(s) should obtain the necessary written permission in advance from any third-party owner of the copyright for the use in print and electronic formats of any of their text, illustrations, graphics, or other material in their manuscript. Permission must also be cleared for any minor adaptations of any work not originally created by the author(s). The author (s) should not assume that any content freely available on the web is free to use.
- Where the author adapts a significant number of any material, the author(s) must inform the copyright holder of the original work.
- Author obtains any proof of consent statements
- The author must acknowledge figure(s) and content adopted or adapted in work utilizing source(s) and further capture them in the list of references.
