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Influence of Audit Evidence on Audit Quality in Nigerian Audit Firms

Abstract

Audit evidence is a fundamental element of the audit process and serves as the basis upon which auditors form professional opinions regarding the fairness and reliability of financial statements. Audit evidence comprises the information obtained by auditors through inspection, observation, inquiry, confirmation, recalculation, reperformance, analytical procedures, and other audit procedures designed to provide sufficient and appropriate assurance about the accuracy of financial reports. The quality of audit evidence directly influences auditors' ability to detect material misstatements, fraud, and errors, thereby enhancing the credibility of audit reports and strengthening public confidence in financial reporting. In Nigeria, the increasing complexity of business transactions, rapid digitalization of accounting systems, adoption of International Standards on Auditing (ISA), and heightened regulatory scrutiny have made the collection and evaluation of high-quality audit evidence more important than ever. Audit firms are expected to obtain sufficient appropriate audit evidence in compliance with professional standards issued by the International Auditing and Assurance Standards Board (IAASB), the Financial Reporting Council of Nigeria (FRCN), and the Institute of Chartered Accountants of Nigeria (ICAN). Despite these requirements, audit firms continue to face challenges such as inadequate documentation, limited access to reliable information, technological changes, management interference, time constraints, audit complexity, and increasing fraud risks, which may adversely affect audit quality. Although previous studies have examined audit independence, audit tenure, and audit competence, empirical evidence regarding the influence of audit evidence on audit quality in Nigerian audit firms remains limited and inconclusive. Against this background, this study investigates the influence of audit evidence on audit quality in Nigerian audit firms. The study is anchored on Audit Risk Theory, Agency Theory, and the Theory of Inspired Confidence. Audit Risk Theory posits that obtaining sufficient and appropriate audit evidence reduces audit risk and enhances the reliability of audit opinions. Agency Theory explains that external audits reduce information asymmetry and agency conflicts by providing independent assurance on financial statements, with the quality of audit evidence serving as a critical determinant of audit effectiveness. The Theory of Inspired Confidence argues that public confidence in audited financial statements depends on the quality, credibility, and reliability of the audit process, which is largely determined by the adequacy of audit evidence obtained. Collectively, these theoretical perspectives provide a comprehensive framework for explaining the relationship between audit evidence and audit quality in Nigerian audit firms. The study adopts a quantitative research design using a structured questionnaire administered to audit partners, audit managers, senior auditors, audit supervisors, audit associates, quality assurance personnel, and other professionals employed in selected audit firms across Nigeria. A stratified random sampling technique will be employed to ensure adequate representation of both international and indigenous audit firms. Audit evidence will be measured using evidence sufficiency, evidence appropriateness, reliability of evidence, relevance of evidence, documentation quality, use of analytical procedures, external confirmations, and technology-assisted audit procedures, while audit quality will be measured using compliance with auditing standards, audit effectiveness, detection of material misstatements, audit report credibility, professional judgment, audit efficiency, and stakeholder confidence. Primary data collected from respondents will be analyzed using descriptive statistics to summarize respondents' demographic characteristics and perceptions regarding audit evidence and audit quality. Structural Equation Modeling (SEM) will be employed to examine the influence of audit evidence on audit quality. The measurement model will be evaluated using Cronbach's Alpha, Composite Reliability (CR), Average Variance Extracted (AVE), and Confirmatory Factor Analysis (CFA) to establish the reliability and validity of the research instrument. Additional diagnostic tests, including multicollinearity assessment, common method bias analysis, and model fit indices such as the Comparative Fit Index (CFI), Tucker-Lewis Index (TLI), Root Mean Square Error of Approximation (RMSEA), and Standardized Root Mean Square Residual (SRMR), will be conducted to ensure the adequacy, consistency, reliability, and robustness of the structural model. The study anticipates that audit evidence will have a significant positive influence on audit quality in Nigerian audit firms. Obtaining sufficient, appropriate, reliable, and relevant audit evidence is expected to improve auditors' ability to detect material misstatements, strengthen professional judgment, enhance audit effectiveness, and increase the credibility of audit reports. Audit firms that consistently apply rigorous evidence-gathering procedures and leverage technology-assisted audit techniques are also anticipated to improve audit efficiency, strengthen compliance with International Standards on Auditing, reduce audit risk, and enhance stakeholder confidence in audited financial statements. Furthermore, robust audit documentation and high-quality evidence are expected to improve audit consistency, facilitate quality assurance reviews, reduce litigation risk, and strengthen the reputation of audit firms. Conversely, inadequate audit evidence, poor documentation, excessive reliance on management representations, limited verification procedures, and weak audit planning may impair audit quality, increase audit risk, undermine investor confidence, and expose audit firms to regulatory sanctions and reputational damage. Consequently, effective collection and evaluation of audit evidence are expected to contribute significantly to improving audit quality, financial reporting reliability, and corporate accountability in Nigeria. This study is expected to make significant theoretical and empirical contributions to the literature on auditing, accounting, corporate governance, and assurance services by providing comprehensive evidence on the relationship between audit evidence and audit quality in Nigerian audit firms. Unlike previous studies that broadly examined determinants of audit quality such as auditor independence or audit tenure, this research specifically evaluates audit evidence as a strategic determinant of audit quality using primary data and Structural Equation Modeling (SEM). The findings will provide valuable insights for the Financial Reporting Council of Nigeria (FRCN), the Institute of Chartered Accountants of Nigeria (ICAN), the Association of National Accountants of Nigeria (ANAN), audit firms, regulators, policymakers, professional accounting bodies, corporate organizations, investors, and academic researchers regarding the strategic importance of high-quality audit evidence in enhancing audit effectiveness and public confidence in financial reporting. The study will also provide evidence-based recommendations for strengthening audit documentation, enhancing auditors' professional competence, expanding technology-assisted audit procedures, reinforcing compliance with International Standards on Auditing, improving quality assurance mechanisms, and promoting high-quality audit practices within the Nigerian auditing profession.

Keywords: Audit evidence, audit quality, audit firms, International Standards on Auditing (ISA), audit risk, audit documentation, professional judgment, Structural Equation Modeling (SEM), assurance services, Nigeria.