Board Structure Mechanisms and Audit Quality of Publicly Quoted Oil and Gas Firms: Evidence from Nigeria

Abstract

This study was carried out with a view to evaluating the effect of board structure mechanisms on audit quality, with moderating role of firm size of quoted oil and gas firms in Nigeria from 2000- 2019. The independent variables are board size and independence, while firm size is the moderating variable. Audit fee was taken as the dependent variable. The choice of audit fee as proxy for audit quality is anchored on audit firms being classified as Big-4 and non-Big 4 and dictates the expertise of audit firm in ensuring quality audit. Secondary data obtained from the audited annual reports and accounts of the studied firms were analysed using descriptive and inferential statistics. The study employed feasible generalized least square (FGLS) regression estimation technique to correct for the presence of group-wise heteroscedasticity and first order auto serial correlation while non-normality of residual was taken care-off by carefully interpreting the p-values instead of t-values of the coefficients. The results revealed the heterogeneous effects of corporate governance mechanisms on audit quality as moderated by firm size. Specifically, board size (coefficient = -0.017 b*0y 8, z_statistics = -3.42) significantly and negatively affected audit quality, while board independence (coefficient = -0.056, z_statistics = -0.77) had no significant effect on audit quality of quoted oil and gas companies in Nigeria. The study recommended among others the need to accomodate a larger board. Larger board in the instance of oil and gas quoted companies in Nigeria may be suitable for achieving the goal of higher audit quality.