IMPACT OF AUDITING AND TAXATION ON SMALL AND MEDIUM SCALE BUSINESS PERFORMANCE IN NIGERIA: EMPIRICAL EVIDENCE FROM FIRM – LEVEL DATA

Abstract

This study examined the impact of auditing and taxation on the performance of small and medium scale businesses in Nigeria, utilising World Bank 2025 firm-level data for Nigeria and applying both robust Ordinary Least Squares (OLS) and Instrumental Variable - Two-Stage Least Squares (IV-2SLS) regression models for robustness checks. The findings revealed robust and consistent model results of the determining factors, with both auditing and taxation variables being significantly associated with small and medium scale business performance in Nigeria. While auditing and tax audit visits or meeting consistently showed positive and statistically significant influence, delays in receiving final audit reports was found to be significantly negatively influencing small and medium scale business performance in Nigeria. Further, taxation-connected variables largely showed robust and consistent negative significant influence on small and medium scale business performance in Nigeria. It was recommended however that government and its policymakers need to enhance and simplify auditing procedures, reassess tax audit systems, reform tax and tax administration policies, among others.