Mismatch between Audit Assurance Progress and Financial Statement Ambiguity in Nigeria

Abstract

This study provides an exploratory investigation into the relationship between audit assurance progress and financial statement ambiguities, as well as the role of business complexity, audit firm characteristics, and corporate governance mechanisms in shaping this relationship. Using a panel data set of 150 publicly listed companies over a five-year period, the study employed a fixed-effects regression model to analyze the hypothesized relationships. The findings indicate that audit assurance progress is negatively associated with financial statement ambiguities, supporting the study's first hypothesis. Additionally, the results show that business complexity is positively associated with financial statement ambiguities, while audit firm characteristics and corporate governance mechanisms are negatively associated with financial statement ambiguities, supporting the remaining hypotheses. These findings contribute to the existing literature by offering a more nuanced understanding of the factors that influence the mismatch between audit assurance and financial reporting quality. The results suggest that audit assurance progress alone may not be sufficient to mitigate financial statement ambiguities, and that a holistic consideration of organizational and governance factors is necessary. The study's recommendations include the development and implementation of robust audit procedures, strengthening of corporate governance requirements, and investment in internal control systems and financial reporting processes. The limitations of the study, such as the geographical scope and data sources, are discussed, and avenues for future research are proposed. Overall, this study provides valuable insights for audit firms, companies, and policymakers in enhancing the effectiveness of the audit assurance process and improving financial reporting transparency.