The Impact of Audit Practices and Profitability of Pharmaceutical Companies in Nigeria

Abstract

This study examined the impact of audit practices on the profitability of pharmaceutical companies in Nigeria. Specifically, the study sought to determine the effect of external audit on Return on Assets (ROA) and Return on Equity (ROE) of pharmaceutical companies in Nigeria. The study adopted a cross-sectional survey design. A sample of (10) pharmaceutical companies were selected for study. Data were collected through a structured questionnaire administered to accounting/finance personnel of the selected pharmaceutical companies. The reliability of the instrument was established using Cronbach's Alpha, with a coefficient of 0.79. Data were analyzed using descriptive statistics and simple linear regression. The findings revealed that external audit has a significant positive effect on Return on Assets, with an R² of 0.624 and a significance level of 0.006. The study also found that external audit has a significant positive effect on Return on Equity, with an R² of 0.672 and a significance level of 0.004. Based on these findings, the study concluded that effective external audit practices contribute significantly to the profitability of pharmaceutical companies. The study recommended that pharmaceutical companies should strengthen their external audit practices by engaging competent, independent and reputable external auditors and ensure the effective implementation of recommendations arising from external audit reports.