Audit Reports and Value Relevance of Accounting Information: Evidence from Commercial Banks in Nigeria
Keywords:
Auditing, Audit Reports, Value Relevance of Accounting Information.
Abstract
This study examined audit reports and value relevance of accounting information in Nigeria quoted commercial banks. Data was sourced from financial statement of Commercial Banks. Two multiple regressions were formulated to investigate the effect of audit reports and audit characteristics on stock prices of the commercial banks. The data analysis technique employed is the multiple regression model based on Statistical Package for Social Sciences version (22.0). The Durbin-Watson statistics show the presence of multiple serial autocorrelation. The result shows collinearity that corresponds with the Eigen value condition index and variance constants are less than the required number, while the variance inflation factors indicate the absence of auto-correlation. The result from model I found that all the audit report variables have positive impact on value relevance while model II found that audit compensation, audit familiarity and corporate governance have positive effect and audit independence, joint audit and audit size have negative effect on stock prices. The study concludes that the independent variables have significant relationship value relevance of accounting information of Nigeria quoted commercial banks. We recommend that auditing should principle of corporate management beyond the present statue.
References
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Abdullahi, I. B, Lawal, W. A, and Ibrahim, R. O (2012). An empirical Estimation of Average Return in the Nigerian Stock Market. International Journal of Social Sciences and Education, 2: 67 – 73
Abiodun, B. Y. (2012). Significance of Accounting Information on Corporate Values of firms in Nigeria, Research Journal In Organizational Psychology & EducationalStudies, 1(2),105-113
Agostino, M., Drago, D., & Silipo, D. B. (2013). The Value Relevance of IFRS In The European Banking Industry. The International Journal of Accounting 48 173–217
Alali, F. A. & Foote, P. S. (2012). The Value Relevance of International Financial Reporting Standards: Empirical Evidence in an Emerging Market. International Journal of Accounting, 47 85–108
Alsaeed, K., (2006). The Association between Firm-Specific Characteristics and Disclosure: the case of Saudi Arabia, Managerial Auditing Journal, 21 (5), 476-496
Amir, E, Harris, T. S. & Venuti, E. K. (1993). A Comparison of the Value Relevance of US versus non-U.S. GAAP Accounting Measures using Form 20-F reconciliations, Journal of Accounting Research, 31: 230–264.
Anandarajan, A. & Hasan,I (2010). Value Relevance of Earnings: Evidence from Middle Eastern and North African Countries. Advances in Accounting, incorporating Advances in International Accounting: 26: 270–279
Arshad, M. A., Satar, R. A., Hussain, M., & Naseem, M. A. (2011). Effect of Audit onProfitability: A Study of Cement Listed Firms, Pakistan. Global Journal of Management andBusiness Research, 11(9), 8-12.
Assidi, S. & Omri, M. A (2012). IFRS and Information Quality: Cases of CAC 40 Companies. Global Journal of Management and Business Research, 12(19)
Azizi Asghar et al, (2010), The relationship between the auditing quality and profit management inthe companies accepted in the stock marke
Ball, R. & Brown, P. (1968). An Empirical Evaluation of Accounting Income Numbers. Journal of Accounting Research. 6, 159-178.
Beaver, W. (1968). The Information Content of Annual earnings announcement, Journal of Accounting research 6, 67 - 92
Beaver, W. H. (1997). Financial Reporting: An Accounting Revolution, Englewood, Cliffs, NJ. Prentice Hall.
Carmichael, D.R. (2004), The PCAOB and the social responsibility of the auditor. Accounting Horizons,18(2), 127-133
Chalmers, K, Clinch, G & Godfrey, J. M (2011). Changes in Value Relevance of Accounting Information upon IFRS adoption: Evidence from Australia Australian Journal of Management: 36: 151
Chandrapala, P (2011). The Value Relevance of Earnings and Book Value: The Importance of Ownership Concentration and Firm Size.
Chang, H. Chen, Y. Su, C. and Chang, Y. (2008). The Relationship between Stock Prices and EPS: Evidence Based on Taiwan Panel Data, Economic Bulletin, 3(30), 1-12.
Chen, C, Young, D. & Zhuang, Z (2013). Externalities of Mandatory IFRS Adoption: Evidence from Cross-Border Spillover Effects of Financial Information on Investment Efficiency The Accounting Review American Accounting Association, 88(3), 881–914.
Choi, S., & Jeter, D., (1992). The effects if qualified audit opinions on earnings response coefficients. Journal of Accounting and Economics 15: 2/3, 229–247.
Cleary, S., (1999). The relationship between firm investment and financial status. Journal of Finance, 54(2), 673-692.
Collins, D. Maydew, E, and Weiss, I. (1997). Changes in the Value-Relevance of Earnings and Book Values over the Past Forty Years. Journal of Accounting and Economics 24(1), 39-67.
Cosserat, G.W. and N. Rodda (2009), Modern auditing, 3 th ed., John Wiley & Sons Ltd
Davis, J.H., Schoorman, F., & Donaldson, L., (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20-47
Deegan, C. & Unerman, J., (2006). Financial accounting theory, McGraw-Hill education, Maidenhead, Berkshire
Donaldson, L. & Davis, J.H. (1991), Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16 (1), 49-65.
Eisenhardt, K.M. (1989). Agency theory: an assessment and review. Academy of management review, 14(1), 57-74.
Elder, R.J., Beasley, M.S & Arens, M.S., (2010). Auditing and assurance services: an integrated approach: global edition, 13th ed.Prentice-Hall, Englewood Cliffs, NJ
Fukukawa, H., and Mock, T.J., (2011). Audit risk assessments using belief versus probability. Auditing: A Journal of Practice and Theory, 30(1), 75-99.
Gee-Jung, M and Kwon, E (2009). The Value Relevance of Book Values, earnings and Cash flows: Evidence from Korea. International journal of business and management, 4(10), 28-42.
Gjerde, O. K. Knivsfla and F. Saettem (2008). The Value-Relevance of Financial Reporting in Norway. 1965- 2004, Working Paper, February.
Glezakos, M. Mylonakis, J. & Kafouros, C. (2012). The Impact of Accounting Information on Stock Prices: Evidence from the Athens Stock Exchange. International Journal of Economics and Finance, 4(2), 56–68.
Hassan, M. S and Saleh, N. M (2010). The Value Relevance of Financial Instruments Disclosure in Malaysian Firms Listed in the Main Board of Bursa Malaysia, International Journal of Economics and Management 4(2): 243 – 270 (2010) ISSN 1823 - 836X
Hellman, N (2011). Soft Adoption and Reporting Incentives: A Study of the Impact of IFRS on Financial Statements in Sweden. Journal of International Accounting Research American Accounting Association 10(1): 61–83
Hellstrom, K. (2005). The Value Relevance of Financial Accounting Information in a Transitional Economy: The Case of the Czech Republic SSE/EFI Working Paper Series in Business Administration.
Hogan, C. E., and Wilkins, M. S., (2008). Evidence on the audit risk model: Do auditors increase audit fees in the presence of internal control deficiencies? Contemporary Accounting Research, 25(1), 219-242.
Hogan, C. E., and Wilkins, M. S., (2008). Evidence on the audit risk model: Do auditors increase audit fees in the presence of internal control deficiencies? Contemporary Accounting Research, 25(1), 219-242.
Jensen, M.C. & Meckling, M.S., (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure, Journal of Financial Economics, 3(4), 305-360.
Kadri, M. H., Abdul Aziz, R., Ibrahim, M. K. (2010). Value Relevance of Book Value and Earnings: Evidence from Two Different Financial Reporting Regimes. Journal of Financial Reporting & Accounting. 7(1), 1-16.
Khanagha, J. B. (2011). International Financial Reporting Standards (IFRS) and Value Relevance of Accounting Information: Evidence from Bahrain and United Arab Emirates Stock Markets, African Journal of Social Sciences 1(1), 101-114.
Khodadadi, V and Emami, M. R. (2009). Using Panel Data Analysis Methods in Ohlson (1995) Model to Predicting Abnormal Earnings, Euro Journals, ISSN: 1451-243X Issue 6,
Kim, O. (2013). Russian Accounting System: Value Relevance of Reported Information and the IFRS Adoption Perspective. The International Journal of Accounting 48: 525–547
Knechel, R., V. Naiker & G. Pacheco (2007). Does industry specialization matter? Evidence from market reaction to auditor switches. Auditing: A Journal of Practice and Theory 26(1), 19–45.
Knechel, R., V. Naiker & G. Pacheco (2007). Does industry specialization matter? Evidence from market reaction to auditor switches. Auditing: A Journal of Practice and Theory 26(1), 19–45.
Konstantinos, P. P and Athanasios, B. P (2011). The Value Relevance of Accounting Information under Greek and International Financial Reporting Standards: The Influence of Firm – Specific Characteristics, International Research Journal of Finance and Economics, ISSN 1450-2887 Issue 76 (2011)
Kouser, R. & Azeem, M. (2011). Relationship of Share Price With Earnings And Book Value Of Equity: Paramount Impact Of IFRS Adoption In Pakistan. Economics and Finance Review 1(8): 84 – 92,
Limperg Institute, 1932 (1985).The social responsibility of the auditor. A basic theory on the auditor's function, by Professor Theodore Limperg (1879-1961) of the University of Amsterdam, Amsterdam, The Netherlands, Limperg Institute
Lin, J. W., & Hwang, M. I. (2010). Audit quality, corporate governance, and earningsmanagement: A meta-Analysis. International Journal of Auditing, 14(1), 57-77.
Luo, L., (2011). Are audit programs responsive to audit risk?, Doctoral thesis, University of Alberta, Canada.
Mohammadi, A. (2012). The Investigation of Relationship between Accounting Information and the Value of Companies (Case Study ),
Nayeri, M. D. Ghayoumi, A. F. & Bidari, M. A. (2012). Factors Affecting the Value Relevance of Accounting Information. International Journal of Academic Research in Accounting, Finance and Management Sciences, 2(2), 76-84.
Ohlson, J. A. (1991). The Theory of Value and Earnings and an Introduction to the Ball- Brown Analysis, Contemporary Accounting Research . 1-19
Olugbenga, A. A., & Atanda, O. A (2014). Value Relevance of Financial Accounting Information of Quoted Companies in Nigeria: A Trend Analysis. Research Journal of Finance and Accounting 5(8)
Oyerinde, D. T. (2009). Value Relevance of Accounting Information in Emerging Stock Market: The Case of Nigeria, Proceedings of the 10th Annual Conference Repositioning African Business and Development for the 21st Century Simon Sigué (Ed.).
Oyerinde, D. T. (2011) Value Relevance of Accounting Information in the Nigerian Stock Market:, A PhD thesis in the Department of Accounting, submitted to the school of postgraduate studies, Covenant University, Ota, Nigeria.
Palea, V. (2014). Are IFRS Value Relevance for Separate Financial Statements? Evidence from the Italian stock market. Journal of International Accounting, Auditing and Taxation 23: 1–17
Pathirawasam, C. (2010). Value Relevance of Accounting Information: Evidence from Sri Lanka. International Journal of Research in Commerce & Management, 8(1): 13-20.
Penman, S. and Sougianis, T. (1998). Comparison of Dividend, Cash Flow and Earnings Approaches to Equity Valuation, Contemporary Accounting Research 15(1), 343- 383.
Suadiye, G. (2012). Value Relevance of Book Value & Earnings Under the Local GAAP and IFRS: Evidence from Turkey. Ege Academic Review 301-310
Subeki, M., (2010). Integrated Earnings Management, Value Relevance of Earnings and Book value of Equity, journal of Accountancy and Auditing, Indonesia, 4 (2),12-24.
Takacs, L. M. (2012). The Value Relevance of Earnings in a transition economy: evidence from Romanian stock market, Annales Universitis Apulensis series Oeconomica, 14 (1).
Tsalavoutas, I., & Dionysiou, D. (2014). Value relevance of IFRS mandatory Disclosure Requirements. Journal of Applied Accounting Research, 15(1): 22 – 42 the International Accounting Standard Board (IASB) Framework (2011).
Vijitha P. and Nimalathasan B. (2012), Value Relevance of Accounting Information and Share Price: A study of listed manufacturing Companies in Sri Lanka. Merit.Research Journal of Business and Management 2(1), 001-006.
Vishnani, S. and B. Shah (2008). International Differences in the Relation between Financial Reporting Decisions and Value Relevance of Published Financial Statements- with Special Emphasis on Impact of Cash Flow Reporting. International Research Journal of Finance and Economics, 17(1), 1450-2887.
Abdullahi, I. B, Lawal, W. A, and Ibrahim, R. O (2012). An empirical Estimation of Average Return in the Nigerian Stock Market. International Journal of Social Sciences and Education, 2: 67 – 73
Abiodun, B. Y. (2012). Significance of Accounting Information on Corporate Values of firms in Nigeria, Research Journal In Organizational Psychology & EducationalStudies, 1(2),105-113
Agostino, M., Drago, D., & Silipo, D. B. (2013). The Value Relevance of IFRS In The European Banking Industry. The International Journal of Accounting 48 173–217
Alali, F. A. & Foote, P. S. (2012). The Value Relevance of International Financial Reporting Standards: Empirical Evidence in an Emerging Market. International Journal of Accounting, 47 85–108
Alsaeed, K., (2006). The Association between Firm-Specific Characteristics and Disclosure: the case of Saudi Arabia, Managerial Auditing Journal, 21 (5), 476-496
Amir, E, Harris, T. S. & Venuti, E. K. (1993). A Comparison of the Value Relevance of US versus non-U.S. GAAP Accounting Measures using Form 20-F reconciliations, Journal of Accounting Research, 31: 230–264.
Anandarajan, A. & Hasan,I (2010). Value Relevance of Earnings: Evidence from Middle Eastern and North African Countries. Advances in Accounting, incorporating Advances in International Accounting: 26: 270–279
Arshad, M. A., Satar, R. A., Hussain, M., & Naseem, M. A. (2011). Effect of Audit onProfitability: A Study of Cement Listed Firms, Pakistan. Global Journal of Management andBusiness Research, 11(9), 8-12.
Assidi, S. & Omri, M. A (2012). IFRS and Information Quality: Cases of CAC 40 Companies. Global Journal of Management and Business Research, 12(19)
Azizi Asghar et al, (2010), The relationship between the auditing quality and profit management inthe companies accepted in the stock marke
Ball, R. & Brown, P. (1968). An Empirical Evaluation of Accounting Income Numbers. Journal of Accounting Research. 6, 159-178.
Beaver, W. (1968). The Information Content of Annual earnings announcement, Journal of Accounting research 6, 67 - 92
Beaver, W. H. (1997). Financial Reporting: An Accounting Revolution, Englewood, Cliffs, NJ. Prentice Hall.
Carmichael, D.R. (2004), The PCAOB and the social responsibility of the auditor. Accounting Horizons,18(2), 127-133
Chalmers, K, Clinch, G & Godfrey, J. M (2011). Changes in Value Relevance of Accounting Information upon IFRS adoption: Evidence from Australia Australian Journal of Management: 36: 151
Chandrapala, P (2011). The Value Relevance of Earnings and Book Value: The Importance of Ownership Concentration and Firm Size.
Chang, H. Chen, Y. Su, C. and Chang, Y. (2008). The Relationship between Stock Prices and EPS: Evidence Based on Taiwan Panel Data, Economic Bulletin, 3(30), 1-12.
Chen, C, Young, D. & Zhuang, Z (2013). Externalities of Mandatory IFRS Adoption: Evidence from Cross-Border Spillover Effects of Financial Information on Investment Efficiency The Accounting Review American Accounting Association, 88(3), 881–914.
Choi, S., & Jeter, D., (1992). The effects if qualified audit opinions on earnings response coefficients. Journal of Accounting and Economics 15: 2/3, 229–247.
Cleary, S., (1999). The relationship between firm investment and financial status. Journal of Finance, 54(2), 673-692.
Collins, D. Maydew, E, and Weiss, I. (1997). Changes in the Value-Relevance of Earnings and Book Values over the Past Forty Years. Journal of Accounting and Economics 24(1), 39-67.
Cosserat, G.W. and N. Rodda (2009), Modern auditing, 3 th ed., John Wiley & Sons Ltd
Davis, J.H., Schoorman, F., & Donaldson, L., (1997). Toward a stewardship theory of management. Academy of Management Review, 22(1), 20-47
Deegan, C. & Unerman, J., (2006). Financial accounting theory, McGraw-Hill education, Maidenhead, Berkshire
Donaldson, L. & Davis, J.H. (1991), Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16 (1), 49-65.
Eisenhardt, K.M. (1989). Agency theory: an assessment and review. Academy of management review, 14(1), 57-74.
Elder, R.J., Beasley, M.S & Arens, M.S., (2010). Auditing and assurance services: an integrated approach: global edition, 13th ed.Prentice-Hall, Englewood Cliffs, NJ
Fukukawa, H., and Mock, T.J., (2011). Audit risk assessments using belief versus probability. Auditing: A Journal of Practice and Theory, 30(1), 75-99.
Gee-Jung, M and Kwon, E (2009). The Value Relevance of Book Values, earnings and Cash flows: Evidence from Korea. International journal of business and management, 4(10), 28-42.
Gjerde, O. K. Knivsfla and F. Saettem (2008). The Value-Relevance of Financial Reporting in Norway. 1965- 2004, Working Paper, February.
Glezakos, M. Mylonakis, J. & Kafouros, C. (2012). The Impact of Accounting Information on Stock Prices: Evidence from the Athens Stock Exchange. International Journal of Economics and Finance, 4(2), 56–68.
Hassan, M. S and Saleh, N. M (2010). The Value Relevance of Financial Instruments Disclosure in Malaysian Firms Listed in the Main Board of Bursa Malaysia, International Journal of Economics and Management 4(2): 243 – 270 (2010) ISSN 1823 - 836X
Hellman, N (2011). Soft Adoption and Reporting Incentives: A Study of the Impact of IFRS on Financial Statements in Sweden. Journal of International Accounting Research American Accounting Association 10(1): 61–83
Hellstrom, K. (2005). The Value Relevance of Financial Accounting Information in a Transitional Economy: The Case of the Czech Republic SSE/EFI Working Paper Series in Business Administration.
Hogan, C. E., and Wilkins, M. S., (2008). Evidence on the audit risk model: Do auditors increase audit fees in the presence of internal control deficiencies? Contemporary Accounting Research, 25(1), 219-242.
Hogan, C. E., and Wilkins, M. S., (2008). Evidence on the audit risk model: Do auditors increase audit fees in the presence of internal control deficiencies? Contemporary Accounting Research, 25(1), 219-242.
Jensen, M.C. & Meckling, M.S., (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure, Journal of Financial Economics, 3(4), 305-360.
Kadri, M. H., Abdul Aziz, R., Ibrahim, M. K. (2010). Value Relevance of Book Value and Earnings: Evidence from Two Different Financial Reporting Regimes. Journal of Financial Reporting & Accounting. 7(1), 1-16.
Khanagha, J. B. (2011). International Financial Reporting Standards (IFRS) and Value Relevance of Accounting Information: Evidence from Bahrain and United Arab Emirates Stock Markets, African Journal of Social Sciences 1(1), 101-114.
Khodadadi, V and Emami, M. R. (2009). Using Panel Data Analysis Methods in Ohlson (1995) Model to Predicting Abnormal Earnings, Euro Journals, ISSN: 1451-243X Issue 6,
Kim, O. (2013). Russian Accounting System: Value Relevance of Reported Information and the IFRS Adoption Perspective. The International Journal of Accounting 48: 525–547
Knechel, R., V. Naiker & G. Pacheco (2007). Does industry specialization matter? Evidence from market reaction to auditor switches. Auditing: A Journal of Practice and Theory 26(1), 19–45.
Knechel, R., V. Naiker & G. Pacheco (2007). Does industry specialization matter? Evidence from market reaction to auditor switches. Auditing: A Journal of Practice and Theory 26(1), 19–45.
Konstantinos, P. P and Athanasios, B. P (2011). The Value Relevance of Accounting Information under Greek and International Financial Reporting Standards: The Influence of Firm – Specific Characteristics, International Research Journal of Finance and Economics, ISSN 1450-2887 Issue 76 (2011)
Kouser, R. & Azeem, M. (2011). Relationship of Share Price With Earnings And Book Value Of Equity: Paramount Impact Of IFRS Adoption In Pakistan. Economics and Finance Review 1(8): 84 – 92,
Limperg Institute, 1932 (1985).The social responsibility of the auditor. A basic theory on the auditor's function, by Professor Theodore Limperg (1879-1961) of the University of Amsterdam, Amsterdam, The Netherlands, Limperg Institute
Lin, J. W., & Hwang, M. I. (2010). Audit quality, corporate governance, and earningsmanagement: A meta-Analysis. International Journal of Auditing, 14(1), 57-77.
Luo, L., (2011). Are audit programs responsive to audit risk?, Doctoral thesis, University of Alberta, Canada.
Mohammadi, A. (2012). The Investigation of Relationship between Accounting Information and the Value of Companies (Case Study ),
Nayeri, M. D. Ghayoumi, A. F. & Bidari, M. A. (2012). Factors Affecting the Value Relevance of Accounting Information. International Journal of Academic Research in Accounting, Finance and Management Sciences, 2(2), 76-84.
Ohlson, J. A. (1991). The Theory of Value and Earnings and an Introduction to the Ball- Brown Analysis, Contemporary Accounting Research . 1-19
Olugbenga, A. A., & Atanda, O. A (2014). Value Relevance of Financial Accounting Information of Quoted Companies in Nigeria: A Trend Analysis. Research Journal of Finance and Accounting 5(8)
Oyerinde, D. T. (2009). Value Relevance of Accounting Information in Emerging Stock Market: The Case of Nigeria, Proceedings of the 10th Annual Conference Repositioning African Business and Development for the 21st Century Simon Sigué (Ed.).
Oyerinde, D. T. (2011) Value Relevance of Accounting Information in the Nigerian Stock Market:, A PhD thesis in the Department of Accounting, submitted to the school of postgraduate studies, Covenant University, Ota, Nigeria.
Palea, V. (2014). Are IFRS Value Relevance for Separate Financial Statements? Evidence from the Italian stock market. Journal of International Accounting, Auditing and Taxation 23: 1–17
Pathirawasam, C. (2010). Value Relevance of Accounting Information: Evidence from Sri Lanka. International Journal of Research in Commerce & Management, 8(1): 13-20.
Penman, S. and Sougianis, T. (1998). Comparison of Dividend, Cash Flow and Earnings Approaches to Equity Valuation, Contemporary Accounting Research 15(1), 343- 383.
Suadiye, G. (2012). Value Relevance of Book Value & Earnings Under the Local GAAP and IFRS: Evidence from Turkey. Ege Academic Review 301-310
Subeki, M., (2010). Integrated Earnings Management, Value Relevance of Earnings and Book value of Equity, journal of Accountancy and Auditing, Indonesia, 4 (2),12-24.
Takacs, L. M. (2012). The Value Relevance of Earnings in a transition economy: evidence from Romanian stock market, Annales Universitis Apulensis series Oeconomica, 14 (1).
Tsalavoutas, I., & Dionysiou, D. (2014). Value relevance of IFRS mandatory Disclosure Requirements. Journal of Applied Accounting Research, 15(1): 22 – 42 the International Accounting Standard Board (IASB) Framework (2011).
Vijitha P. and Nimalathasan B. (2012), Value Relevance of Accounting Information and Share Price: A study of listed manufacturing Companies in Sri Lanka. Merit.Research Journal of Business and Management 2(1), 001-006.
Vishnani, S. and B. Shah (2008). International Differences in the Relation between Financial Reporting Decisions and Value Relevance of Published Financial Statements- with Special Emphasis on Impact of Cash Flow Reporting. International Research Journal of Finance and Economics, 17(1), 1450-2887.
Published
2018-03-13
How to Cite
Ibanichuka, E. A., & Briggs, A. C. (2018). Audit Reports and Value Relevance of Accounting Information: Evidence from Commercial Banks in Nigeria. Indian Journal of Finance and Banking, 2(1), 44-62. https://doi.org/10.46281/ijfb.v2i1.92
Section
Regular Research Article/ Short Communication Article
Copyright (c) 2018 E. A.L. Ibanichuka, Alasin Captain Briggs
This work is licensed under a Creative Commons Attribution 4.0 International License.
