EFFECT OF INTERNAL AUDIT PRACTICES ON THE FINANCIAL REPORTING QUALITY OF SELECTED CONSUMER GOODS MANUFACTURING FIRMS IN NIGERIA

Abstract

Internal audit is a fundamental component of organizational governance, risk management, and control processes. When internal auditors are not fully independent, their ability to identify and report financial irregularities or control weaknesses is diminished, potentially leading to financial misstatements, undetected fraud, and a lack of transparency in financial reporting. Therefore, the study examined the relationship between internal audit practices and financial reporting quality of selected consumer goods manufacturing firms in Nigeria. The study adopted expost facto research design whereby data were sourced mainly from the audited annual financial reports of selected consumer goods manufacturing companies on the Nigerian Exchange Group for the period 2015-2024. The population of the study consists of twenty one (21) consumer goods manufacturing companies in Nigeria as at December 2024. The sample size of eight (8) consumer goods manufacturing companies was arrived at using purposive sampling technique whereby consumer goods manufacturing companies which have their annual report and accounts readily accessible for the study period were selected. Analytical techniques in the study consist of both descriptive and inferential statistics. Descriptive statistics were used to describe the study variables while Panel regression analysis was used to examine the extent to which internal audit practices influence financial reporting quality of selected consumer goods manufacturing firms in Nigeria. Findings from the result of panel regression analysis on the extent to which internal audit practices influence financial reporting quality of selected consumer goods manufacturing firms in Nigeria showed that two out of the five explanatory variables were positively significant in explaining the variation of financial reporting quality. These variables are auditor’s competence (p=0.0489) and audit experience (p=0.0002). The study therefore concluded that there is a significant relationship between internal audit and financial reporting quality of selected consumer goods manufacturing firms in Nigeria.it is therefore recommended that regular performance evaluations of internal audit staff should be conducted to improve in financial reporting to maintain a strong beneficial relationship between internal auditing and reporting quality.