Assessing The Influence Of Audit Quality On Share Prices In The Financial Services Sector: The Roles Of Audit Fees, Audit Tenure, And Audit Firm Size

This study addresses the critical issue of the relationship between audit quality and share prices in Nigeria's financial services sector, a key driver of economic growth that has experienced significant fluctuations in market valuations. The main aim was to examine the effects of audit fees, audit tenure, and audit firm size on share prices. Utilizing a sample of 32 financial service firms listed on the Nigerian Stock Exchange from 2013 to 2022, the study employed panel data regression techniques, specifically the GMM II models, to analyze the data. The findings revealed that both audit fees and audit tenure have significant negative effects on share prices, indicating that higher audit fees and longer auditor-client relationships can erode investor confidence and depress market valuations. In contrast, audit firm size did not have a significant impact, suggesting that the perceived quality benefits of being audited by a Big Four firm do not necessarily translate to higher share prices in the Nigerian context. The results imply that investors are particularly sensitive to audit-related costs and the potential compromise of auditor independence over long tenures. Consequently, it is essential for corporate managers and directors to adopt cost-effective audit practices without compromising quality, while policymakers should enforce transparency in audit fee disclosures and mandate auditor rotations to enhance independence. Analysts and investors are advised to scrutinize audit fee disclosures and monitor auditor tenure as part of their investment decisions. Despite the lack of significant impact from audit firm size, firms should still consider the reputational advantages of engaging Big Four auditors. The study underscores the importance of maintaining a balance between audit quality and associated costs to sustain investor confidence and market stability. Future research should explore the broader implications of audit quality across different sectors and regions to provide more generalized insights.