Role of Auditor Independence in Enhancing Audit Quality: Evidence from Nigeria’s Insurance Sector
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Abstract
This study examines the role of auditor independence in enhancing audit quality, with a focus on listed insurance companies in Nigeria. Auditor independence is a cornerstone of credible financial reporting, and its influence on audit quality remains a critical area of interest, particularly in sectors such as insurance that are highly regulated and sensitive to public trust. The paper adopts secondary data based on the available existing studies in the area. Key indicators of auditor independence, such as audit firm tenure, provision of non-audit services, audit fees, and regulatory compliance, are assessed against established measures of audit quality, including financial report accuracy, detection of material misstatements, and stakeholder confidence. The paper argues that there a significant positive correlation between auditor independence and audit quality, underscoring the importance of strict adherence to ethical standards and regulatory frameworks. The study affirms that auditor independence plays a critical role in enhancing audit quality within Nigeria’s insurance sector. Independent auditors are better positioned to deliver objective, unbiased assessments of financial statements, thereby strengthening the credibility and reliability of financial reporting. The findings reveal that key elements such as audit firm tenure, non-audit service restrictions, and regulatory oversight significantly influence the degree of auditor independence and, by extension, the quality of audits conducted. Despite the progress made, challenges such as long auditor-client relationships, inadequate enforcement of auditor rotation, and the provision of non-audit services continue to undermine audit objectivity in the sector.
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Aondover, T. A. (2025). Role of Auditor Independence in Enhancing Audit Quality: Evidence from Nigeria’s Insurance Sector. Economit Journal: Scientific Journal of Accountancy, Management and Finance, 5(1), 44-56. https://doi.org/10.33258/economit.v5i1.1314
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References
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Aondover, T. A. (2025). The Impact of Company Income Tax and Petroleum Profit Tax on the Profitability of Listed Oil and Gas Firms in Nigeria. Economit Journal: Scientific Journal of Accountancy, Management and Finance, 5(1), 34-43.
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Bae, G., Kallapur,S., and Rho,J.H., (2013). Departing and Incoming Auditor Incentives, and Auditor-Client Misalignment under Mandatory Auditor Rotation: Evidence from Korea.Working paper.
Beattie, V., Brandt, R. & Fearnley, S. (1999). Perceptions of auditor independence: UK evidence. Journal of International Accounting, Auditing and Taxation, 8(1), 67–107.
Carmichael, D. R. (2004). The PCAOB and the social responsibility of auditors, Accounting Horizons, 18(2), 127-133.
Chi,W., Huang, H., Liao, Y & Xie, H. (2009) : Mandatory Audit-Partner Rotation, Audit Quality and Market Perception: Evidence from Taiwan. Contemporary Accounting Research, 26(2): 359 – 391.
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Davis, L. R., Soo, B. & Tromperter, G. (2000). Auditor tenure, auditor independence and earnings management. Journal of Accounting and Economics, 3(1), 2-42.
DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183-199.
DeFond, M. L., Raghunandan, K. & Subramanyam, K. R. (2002). Do non-audit service fees impair auditor independence? Evidence from going concern audit opinions. Journal of Accounting Research, 40, 1247-1274.
DeFond, M., Erkens, D. H., & Zhang, J. (2013). Do client characteristics really drive Big N quality differentiation. University of Southern California.
Donovan, J., Frankel, R., Lee, J., Martin, X., & Seo, H. (2014). Issues raised by studying DeFond and Zhang: What should audit researchers do?. Journal of Accounting and Economics, 58(2), 327-338.
Egbunike, A. & Abiahu, K. H. (2017). How increased regulatory oversight of non-audit services affects investors’ perceptions of earnings quality. Auditing: A Journal of Practice & Theory, 32(1), 85-112.
Fargher, N., Lee, H. Y. & Mande, V. (2008). The effect of audit partner tenure on client
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Ilaboya O. J. & Ohiokha F. I. (2014). Audit firm characteristics and audit quality in Nigeria. International Journal of Business and Economics Research, 3(5), 187-195.
Jusoh, M. A. & Almad, A. C. (2014). Equality, Ownership, Audit Quality and Firm Performance in Malaysia Using Generalized Least Square Estimations Technique. Journal of Emerging Issues in Economics, Finance and Banking, 3(1): 976-991.
Kabiru, I. D. & Abdullahi, S. R., (2012). An examination into the quality of audited financial statements of money deposit banks in Nigeria. International Journal of Academic Research in Accounting, Finance and Management, 4(1), 145-156.
Mautz, R. K. & Sharaf, H. A. (1961). The philosophy of auditing: American Accounting Association Monograph: Sarasota, FL: American Accounting Association.
Ndubuisi, A. N., Okeke, M. N. & Chinyere, O. J. (2017). Audit quality determinants: Evidence from quoted health care firms in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Science. 7(4) 216-231.
Odia, J. O. (2015). Auditor tenure, auditor rotation and audit quality- a review. European Journal of Accounting, Auditing and Finance Research, Vol. 3(10), pp.76-96.
Ogbeide, I. E. Okaiwele, I. & Ken-Otokiti, D. (2018). Auditor Independence and audit quality. International Accounting and Taxation Research Group, Faculty of Management Sciences, University of Benin, Benin City, Nigeria http://www.atreview.org
Okolie, A. O. & Izedonmi, F. I. O. (2014). Impact of Audit Quality on the Share Prices of Quoted Companies in Nigeria. Research Journal of Finance and Accounting, 5(8): 150 –166.
Okolie, A. O. (2014). Auditor tenure, auditor independence and accrual-based earnings management of quoted companies in Nigeria. European Journal of Accounting Auditing and Finance Research, 2(2), 63-90.
Oluwagbuyi, O. L. & Olowolaju, M. (2013). Incessant Financial Scandals in the Corporate Organisations in Nigeria: Auditors’ Culpability. Research Journal of Finance and Accounting, 4(9): 104 -109.
Pitt, H. (2012). Statement of Harvey L. Pitt before the Public Company Accounting Oversight Board Concerning Auditor Independence and Audit Firm Rotation. Washington, DC.
Rahmina, L. Y., & Agoes, S. (2014). Influence of auditor independence, audit tenure, and audit fee on audit quality of members of capital market accountant forum in Indonesia‟, International Conference on Accounting Studies ICAS 2014, 18-19
Romano, A. (2004). The Importance of Audit Quality Standards. Proceedings of the Accounting Research Workshop at the University of Basel. Available at: http://arw-suisse.ch/wp-content/uploads/2013/autrey.pdf. Accessed on 25th May, 2015.
Saputra, W. (2015). The impact of auditor‘s independence on audit quality: A theoretical approach. International Journal of Scientific & Technology Research, 4(12), 348-353.
Song, J. & Windram, B. (2000). The effectiveness of audit committee: Experience from UK, Working Paper. 12th Asian-Pacific Conference on International Accounting Issues. Beijing. China. 21-24, October.
Tapang, A. T., Kankpang, A. K., Inah, E. U., Bessong, P. K. & Uklala, A. P. (2020). Audit quality control and its influence on audit report in Nigeria. European Journal of Economics, Finance and Administrative Sciences, 1(4), 34-48.
Tepalagul, N. & Lin, L. (2015). Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1) 101–121.
Adeyemi, S. B., Okpala, O. & Dabor, E. L. (2012). Factors affecting audit quality in Nigeria. International Journal of Business and Social Science, 3(20), 198-209.
Akpom, U. N. & Dimkpah, Y. O. (2013). Determinants of auditor independence: A comparison of the perceptions of auditors and non-auditors in Lagos, Nigeria. Journal of Finance and Accountancy, 12(9), 1-17.
Alim, M. N., Trisni, H. & Lilik, P. (2007). The effect of competence and independence to the audit quality, Proceeding of National Accounting Symposium, Indonesian Accounting Association, Makassar, Indonesia, 31-48.
Aondover, T. A. (2025). The Impact of Company Income Tax and Petroleum Profit Tax on the Profitability of Listed Oil and Gas Firms in Nigeria. Economit Journal: Scientific Journal of Accountancy, Management and Finance, 5(1), 34-43.
Arens, A. A., Elder, R.J., Beasley, M. S. & Fielder, B. A. (2011). Auditing, assurance service and ethics in Australia (8th edition). Pearson Australia.
Babatolu, A. T., Aigienohuwa, O. O. & Uniamikogbo, E. (2016). Auditor’s independence and audit quality: A study of selected deposit money banks in Nigeria. International Journal of Finance and Accounting, 5(1), 13-21.
Bae, G., Kallapur,S., and Rho,J.H., (2013). Departing and Incoming Auditor Incentives, and Auditor-Client Misalignment under Mandatory Auditor Rotation: Evidence from Korea.Working paper.
Beattie, V., Brandt, R. & Fearnley, S. (1999). Perceptions of auditor independence: UK evidence. Journal of International Accounting, Auditing and Taxation, 8(1), 67–107.
Carmichael, D. R. (2004). The PCAOB and the social responsibility of auditors, Accounting Horizons, 18(2), 127-133.
Chi,W., Huang, H., Liao, Y & Xie, H. (2009) : Mandatory Audit-Partner Rotation, Audit Quality and Market Perception: Evidence from Taiwan. Contemporary Accounting Research, 26(2): 359 – 391.
Dabor, E. L. & Dabor, A. O. (2015). Audit committee characteristics, board characteristics and financial reporting quality in Nigeria. International Journal of Economics, Commerce and Management, 3(11), 1292-1304.
Davis, L. R., Soo, B. & Tromperter, G. (2000). Auditor tenure, auditor independence and earnings management. Journal of Accounting and Economics, 3(1), 2-42.
DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183-199.
DeFond, M. L., Raghunandan, K. & Subramanyam, K. R. (2002). Do non-audit service fees impair auditor independence? Evidence from going concern audit opinions. Journal of Accounting Research, 40, 1247-1274.
DeFond, M., Erkens, D. H., & Zhang, J. (2013). Do client characteristics really drive Big N quality differentiation. University of Southern California.
Donovan, J., Frankel, R., Lee, J., Martin, X., & Seo, H. (2014). Issues raised by studying DeFond and Zhang: What should audit researchers do?. Journal of Accounting and Economics, 58(2), 327-338.
Egbunike, A. & Abiahu, K. H. (2017). How increased regulatory oversight of non-audit services affects investors’ perceptions of earnings quality. Auditing: A Journal of Practice & Theory, 32(1), 85-112.
Fargher, N., Lee, H. Y. & Mande, V. (2008). The effect of audit partner tenure on client
Ikharo C.O. (2015). The impact of Auditor’s tenure on quality audit report. Research Journal of Finance and Accounting, ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.6, No.1. ww.iiste.org
Ilaboya O. J. & Ohiokha F. I. (2014). Audit firm characteristics and audit quality in Nigeria. International Journal of Business and Economics Research, 3(5), 187-195.
Jusoh, M. A. & Almad, A. C. (2014). Equality, Ownership, Audit Quality and Firm Performance in Malaysia Using Generalized Least Square Estimations Technique. Journal of Emerging Issues in Economics, Finance and Banking, 3(1): 976-991.
Kabiru, I. D. & Abdullahi, S. R., (2012). An examination into the quality of audited financial statements of money deposit banks in Nigeria. International Journal of Academic Research in Accounting, Finance and Management, 4(1), 145-156.
Mautz, R. K. & Sharaf, H. A. (1961). The philosophy of auditing: American Accounting Association Monograph: Sarasota, FL: American Accounting Association.
Ndubuisi, A. N., Okeke, M. N. & Chinyere, O. J. (2017). Audit quality determinants: Evidence from quoted health care firms in Nigeria. International Journal of Academic Research in Accounting, Finance and Management Science. 7(4) 216-231.
Odia, J. O. (2015). Auditor tenure, auditor rotation and audit quality- a review. European Journal of Accounting, Auditing and Finance Research, Vol. 3(10), pp.76-96.
Ogbeide, I. E. Okaiwele, I. & Ken-Otokiti, D. (2018). Auditor Independence and audit quality. International Accounting and Taxation Research Group, Faculty of Management Sciences, University of Benin, Benin City, Nigeria http://www.atreview.org
Okolie, A. O. & Izedonmi, F. I. O. (2014). Impact of Audit Quality on the Share Prices of Quoted Companies in Nigeria. Research Journal of Finance and Accounting, 5(8): 150 –166.
Okolie, A. O. (2014). Auditor tenure, auditor independence and accrual-based earnings management of quoted companies in Nigeria. European Journal of Accounting Auditing and Finance Research, 2(2), 63-90.
Oluwagbuyi, O. L. & Olowolaju, M. (2013). Incessant Financial Scandals in the Corporate Organisations in Nigeria: Auditors’ Culpability. Research Journal of Finance and Accounting, 4(9): 104 -109.
Pitt, H. (2012). Statement of Harvey L. Pitt before the Public Company Accounting Oversight Board Concerning Auditor Independence and Audit Firm Rotation. Washington, DC.
Rahmina, L. Y., & Agoes, S. (2014). Influence of auditor independence, audit tenure, and audit fee on audit quality of members of capital market accountant forum in Indonesia‟, International Conference on Accounting Studies ICAS 2014, 18-19
Romano, A. (2004). The Importance of Audit Quality Standards. Proceedings of the Accounting Research Workshop at the University of Basel. Available at: http://arw-suisse.ch/wp-content/uploads/2013/autrey.pdf. Accessed on 25th May, 2015.
Saputra, W. (2015). The impact of auditor‘s independence on audit quality: A theoretical approach. International Journal of Scientific & Technology Research, 4(12), 348-353.
Song, J. & Windram, B. (2000). The effectiveness of audit committee: Experience from UK, Working Paper. 12th Asian-Pacific Conference on International Accounting Issues. Beijing. China. 21-24, October.
Tapang, A. T., Kankpang, A. K., Inah, E. U., Bessong, P. K. & Uklala, A. P. (2020). Audit quality control and its influence on audit report in Nigeria. European Journal of Economics, Finance and Administrative Sciences, 1(4), 34-48.
Tepalagul, N. & Lin, L. (2015). Auditor independence and audit quality: A literature review. Journal of Accounting, Auditing & Finance, 30(1) 101–121.