EFFECT OF AUDIT FEES ON RETURN ON ASSET OF LISTED NIGERIAN TELECOMMUNICATION COMPANIES

Abstract

This study examined the effect of audit fees on the Return on Assets (ROA) of listed Nigerian telecommunication companies using regression analysis. The analysis incorporated key audit-related variables, including audit fees (AFE), audit firm size (AFS), and audit tenure (ATU), to determine their influence on firms’ financial performance. The regression results revealed that audit fees (AFE) had a significant negative effect on ROA (coefficient = −2.3077, p < 0.01), suggesting that higher audit costs may reduce profitability due to increased financial outlays. Conversely, audit tenure (ATU) showed a positive but statistically insignificant relationship with ROA (coefficient = 0.3802, p = 0.0831), indicating that longer auditor engagement may slightly enhance performance through accumulated knowledge and efficiency gains. Audit firm size (AFS) exhibited an insignificant negative relationship with ROA (coefficient = −0.0044, p = 0.6521), implying that the scale of the auditing firm does not necessarily translate to improved firm profitability. The model recorded an R-squared value of 0.5105 and an adjusted R-squared of 0.4898, indicating that approximately 51% of variations in ROA are explained by the independent variables. The study concludes that audit fees play a critical role in influencing financial performance, and companies should strike a balance between audit cost and the quality of audit services obtained.