IMPACT OF AUDIT QUALITY ASSURANCE ON

FIRM’S PERFORMANCE IN NIGERIA

(A CASE STUDY OF TUYIL PHARMACEUTICAL COMPANY LTD.)

BY

AZEEZ KABIRU AKOREDE

ND/22/ACC/PT/309

BEING A PROJECT SUBMITTED TO THE DEPARTMENT OF

ACCOUNTANCY, INSTITUTE OF FINANCE AND MANAGEMENT
STUDIES,
KWARA STATE POLYTECHNIC ILORIN

IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD

OF NATIONAL DIPLOMA (ND) IN ACCOUNTANCY, INSTITUTE OF
FINANCE AND MANAGEMENT STUDIES
KWARA STATE POLYTECHNIC ILORIN

JULY 2023
 CERTIFICATION
This is to certify that this project has been read and approved as meeting part of the

requirements for the award of National Diploma (ND) in Accountancy, in the

Department of Accountancy, Institute of Finance and Management Studies, Kwara

State Polytechnic, Ilorin

_______________________ ________________________

Date
(Project Supervisor)

______________________ __________________________
Date
(Project Coordinator)

______________________ __________________________
Date
(Head of Department)

______________________ __________________________
Date
(External Examiner)
 DEDICATION
I specially dedicate my project to Almighty Allah the creature and His beloved

Prophet Muhammad (S.W.A) who give me the knowledge, wisdom and

understanding. If not for His grace what would I have achieved and for giving me

the opportunity to make it in my life till this moment. Also appreciate the efforts of

my lovely parent. MR. & MRS AZEEZ, May you all reap the fruit of your labor in

sha Allah (Ameen).

 ACKNOWLEDGEMENT
An extreme gratitude goes to Almighty Allah for making this project in the onset it

was as it not going to be possible but by his grace everything took shape and

everything is now a success.

An extreme gratitude goes to my supportive, knowledgeable and sophisticated

supervisor MR. AZEEZ, YAHAYA O. For his effort and endurance rendered in

making this project work a success. I equally appreciate and acknowledge the Head

of Department of Accountancy in person of (DR .F.A ABDULSALAM) for giving

on this golden opportunity to carry out this wonderful project. This has really helped

us in acquiring new essential detailed information of the project.

I really express much gratitude to my darling, Loving and caring parents MR. AND

MRS. AZEEZ who are the source of success my greatness with their financial

support, words of encouragement and guidelines in becoming a better person in life,

may God be with you, shower is blessing mercies and goodness on you that

contributed on one way or other in to my life. I wouldn't have come this far because

of you people.

JAZAKUNMULLAHI KHAIRAN
 TABLE OF CONTENT

Front Page i
Certification ii
Dedication iii
Acknowledgements iv
Table of contents v
Abstract vi

CHAPTER ONE
1.0 Introduction 1
1.1 Background to the study 1
1.2 Statement of Problem 7
1.3 Research Question 10
1.4Objective of study 12
1.5 Research hypotheses 16
1.6 Significance of the study 17
1.7 Scope of the study 18
1.8 Limitations of the study 18
1.9 Definition of terms 19

CHAPTER TWO
LITERATURE REVIEW 20
2.1 Introduction 20
2.2 Conceptual Review 20
2.3 Consumer Based Brand Equity 21
2.4 Branding and Brand 27
2.5 Theoretical Review 29
2.6 Empirical Review

CHAPTER THREE
3.0 Research Methodology 59
3.1 Introduction 59
3.2 Research Design 59
3.3 Population of the Study 64
3.4 Sampling Design 65
3.5 Instruments Data Collection 66
3.6 Interview Schedule 68
3.7 Data Collection Procedures 70
3.8 Method of Data Analysis 72
CHAPTER FOUR
4.0 Research Findings and Discussions 74
4.1 Introduction 74
4.2 Analysis of the response rate and descriptive statistics 75
4.3 Salient Characteristics of key variables 81
4.4 Logistic regression results and interpretation 83
4. 5 Test of hypotheses 87
4.6 Discussion of finding 90

CHAPTER FIVE
5.0 Summary, Conclusion and Recommendations 101
5.1 Summary 101
5.2 Conclusions 101
5.4 Recommendations 108
REFERENCES 110
 ABSTRACT

This study investigates the impact of audit quality assurance on the performance of firms in
Nigeria, with a specific focus on Tuyil Pharmaceutical Company Ltd. As regulatory requirements
and stakeholder expectations increasingly emphasize the importance of high-quality audits,
understanding how audit quality assurance practices influence firm performance becomes
imperative. Utilizing a mixed-methods approach, this research integrates quantitative analysis of
financial data with qualitative insights from interviews and surveys. The findings reveal a
significant positive relationship between audit quality assurance and firm performance,
highlighting the pivotal role of rigorous audit practices in enhancing financial reporting reliability,
corporate governance, and overall organizational effectiveness. The study contributes to the
existing literature by providing empirical evidence tailored to the Nigerian context and offers
practical implications for stakeholders, including regulatory bodies, auditors, and management, to
strengthen audit quality assurance mechanisms and thereby drive sustainable business outcomes.
Furthermore, this study delves into the specific mechanisms through which audit quality assurance
impacts firm performance within the Nigerian pharmaceutical sector. By examining the practices
and procedures implemented by Tuyil Pharmaceutical Company Ltd., insights are gained into how
these strategies contribute to enhancing internal control systems, mitigating financial risks, and
fostering investor confidence. The research also explores the perceptions and experiences of key
stakeholders, including auditors, management, and shareholders, shedding light on the
effectiveness of current audit quality assurance frameworks and identifying areas for
improvement. Ultimately, the findings underscore the imperative for continuous monitoring and
enhancement of audit quality assurance processes to not only meet regulatory requirements but
also to drive sustainable growth and competitiveness in the dynamic Nigerian business
environment.
 CHAPTER ONE
1.0 Introduction

1.1 Background to the study

Before the global auditing scandal in 2002 by one of the five big audit firms in the world, Arthur

Anderson, auditors have been the trust of the user of financial statements. An auditor has a

secondary responsibility of preventing, detecting and reporting of fraud and other illegal acts and

errors to the stakeholders and the general public. It is widely recognized that auditing is a

cornerstone in developing and enhancing the global economic and business firms. (Ahmed, Suhara

& Iiyas, 2016). In the business environment, auditors are required to provide objective assessments

concerning whether companies are managed responsibly and effectively to achieve the intended

result or not. The confidence of investors is very important in the successful operation of the

world’s financial market, and is one of the most frequently debated areas amongst auditors,

politicians, media, regulators and the public (Eshitemi & Omwenga, 2016).

The trust of auditors in delivering high quality report continue until after the Enron scandal in 2002

and the collapse of both small and big corporations across the globe which resulted in a heavy

debate about audit quality and the factors that might influence the quality of an audit.

The audit profession suffered a hit on the basic principle of independence of an auditor and audit

report presented to the public. The auditor’s opinion by client management, and if the quality of

the performance of the auditor is not objective, it would mean that the auditor’s opinion does not

add anything to the credibility and reliability of financial statements. Therefore, an independent

audit provides reasonable basis for an unbiased assessment of the quality of information provided

in financial statements. Quality of audit reports is a basic requirement to enhance the credibility of
financial statements within the stakeholders to reduce investor’s risk in the organization (Rezaei

& Shabani, 2014 and Olowookere & Adebiyi, 2013).

Suffice it to say that high quality financial reporting depends on the role the external audit plays

in supporting the audit quality of financial reporting. It is an important part of the regulatory and

supervising infrastructure, and thus an activity of significant public interest. External audits

performed in accordance with high quality auditing standards can promote the implementation of

accounting standards by reporting entities and help ensure their financial statements are reliable,

transparent and useful. The statutory audit can reinforce confidence because auditors are expected

to provide an objective opinion on the preparation and presentation of financial statements.

In the quest to improve audit quality in the financial reports of quoted manufacturing firms in

Nigeria, some variables have been observed such as auditor’s independence; audit fee; audit

committee; and so on. Various audit quality frames for high quality financial reporting as

embedded in beauty fame of auditor and professional care of auditor have increased the quality of

financial reports in Nigeria manufacturing firms. Over the last decades, quality of audit report has

gained considerable momentum around the world because of the fall of Arthur Anderson in 2002,

following its involvement in the firm scandal. This is sequel to the fact auditors are required to

show a high standard in their auditoria financial reporting as well as act whistle blowers in any

fraud committed by their client firms. The combined effect of transparent and comparable financial

reporting will drive down information asymmetry; improve the audit quality of quoted

manufacturing firms in Nigeria (Chukwu, 2015). The question is, has the auditor’s opinion or

report shown high audit quality on financial performance of quoted manufacturing firms in

Nigeria?
 1.2 Statement of the Problem

The financial crises and collapse of a number of industries which prompted accounting regulations

to examine carefully, as never before, the reporting practice and accounting standard have helped

in generating pressures that motivated changes in the audit quality reporting and assurance in the

financial statements in the country. The financial scandals have shown the incapacity of these

concepts (auditor’s competence and independence) to guarantee audit quality on their own. These

have created a revolution in the design and evolution of the audit quality which needs total

reinforcement in order to solve the problem. The need for high quality external audit has become

a global concern following corporate scandals involving Enron; World Coin; Global Crossing;

Condert; Sunbeam (United States); BCCI; Independence Insurance; Equitable Life; Maxwell

(United Kingdom); Metallgesellscheft (Germany); Liver Brothers; African Petroleum; Cadbury;

Savanna Bank; Wema Bank and Intercontinental Bank (Nigeria). The persistent firms failure all

over the world have raised some fundamental issues on the quality of audit, independence of the

external auditor among others. The poor audit reports from companies have made attraction of

quality and sustainable foreign investment in Nigeria elusive. Studies have shown that the

confidence of users of financial statement has been increasingly destroyed by the poor quality of

audit reports presented in the financial statement issued in Nigeria (Enekwe, Onyekwelu,Nwaeha

& Okwo, 2016). In the light of the above, the major problem if this study is to determine the effect

of Audit quality assurance (Auditor's Independence, audit committee, and audit fee) on financial

performance of pharmaceutical firms in Nigeria.

1.3 Research Questions

The following research questions are asked for the study:

1. To what extent is the effect of auditor's independence on return on asset of listed

manufacturing firms in Nigeria?

2. To what extent does audit committee affect the return on asset of listed manufacturing firms

in Nigeria?

3. Does Audit fee have an effect on return on asset of listed manufacturing firms in Nigeria?
1.4 Objectives of the study

The main objectives of the study is to determine the effect of the audit on financial performance

of listed manufacturing firms in Nigeria.

The specific objectives are:

i. To examine the effect of auditor's independence (AUDIND) on Return on Assets (ROA) of listed

manufacturing firms in Nigeria.

ii. To evaluate the effect of Audit committee (AUDCOM) on Return on Assets (ROA) of listed

manufacturing firms in Nigeria.

1.5 Research Hypotheses

The following null hypothesis were formulated for the study:

H01: Auditor's independence (AUDIND) has no significant effect on Return on Assets (ROA) of

listed manufacturing firms in Nigeria.

H02: There is no significant effect of Audit committee (AUDCOM) on Return on Assets (ROA)

of listed manufacturing firms in Nigeria.

H03: There is no significant effect of Audit fee (AUDFEE) on Return on Assets (ROA) of listed

manufacturing firms in Nigeria.

1.6 Significance of the Study

The significance of the study is the provision of knowledge and skills to researcher and gain skills

of doing research and come to know the relationship between the variables (Audit Quality

Assurance) which is under the study. This study examine the effectiveness of audit quality; it also

looks into how Audit Quality Assurance can be instrumental to improving public sector

management and provides solutions to those identified problems. Hence, this attempt was done in

order to get deep understanding regarding how internal audit is to be put into real practice and

bringing out something unique so as to bring out effective government account that can be reliable

or been able to rely upon.

Consequently, it will add to empirical data bank of the subject matter as other future researchers

can use it as a literature review.

1.7 Scope of the study

The study encompasses the quality of audit on firm performance, in line with various kinds of

Audit styles in firms, in order to know the effect of audit quality and the performance of firms.

The scope of the study will therefore be to know the performance of organization with the help of

audit quality.

1.8 Limitations of the study

Since the research work is based on the performance of firm and audit quality, the work will

be limited to Tuyil pharmaceutical Ltd bottling company Ilorin.

1.9 Definition of Key Terms

Awe (2008) defined auditing as an independent examination of the books and accounts of an

organization by a duty appointed person to enable the person give an opinion as to whether the

account give true and fair view and comply with relevant statutory guidelines.

AUDIT QUALITY

Audit quality is the join probability that an auditor will both discover and report a breach in the

clients accounting system. The discovery of a misstatement measure quality in terms of auditor's

knowledge and ability while reporting the misstatements depends on the auditor's initiative to

disclose. Dé Angelo, (1981). Audit quality defines as auditors use some techniques to recognize

misstatements in clients accounting system and report the misstatement.

INTERNAL AUDIT

Internal audit is review of operations and records undertaken within a business by specially

assigned staff. It is posting transaction review to evaluate the correctness of records and the

effectiveness of operations on a continuous basis.

1.10 OUTLINE OF CHAPTER

The research work of five chapters, whereby the chapter (1) is the general introduction, the chapter

(2) will be the literature review, the chapter (3) will be the research methodology, the chapter (4)

will be the data analysis and the chapter five will be the summary, conclusion and

recommendations.
 CHAPTER TWO
2.0 Literature Review

2.1 Preamble
This chapter reviews the related literature such as textbook, published journals, articles,

Newspapers, people's views, scholarly presented papers e.t.c on the research topic.

This chapter reviewed the conceptual, theoretical and empirical framework of the research work.

2.2 Conceptual Review

Concept of Auditing

In the auditing industry, service quality refers to audit quality or auditor quality, Dé Angelo (1981) firstly

defined audit as the joint probability that auditor will discover and report a break in their client's accounting

system. No single agreed definition of Audit serve as a standard against which actual performance can be

assessed (FKC, 2006). As audit quality is unobservable, after Dé Angelo (1981), researchers established

several proxy variable for testing, including auditor size (simunic and stein, 1996, Francis and Wilson,

1988; Palmorse, 1988; Dé Fond, 1992; Yahn 2013), auditor litigation (Palmrose, 1988; Heninger, 2001),

and discretionary accruals (Becker et all, 1999; Venkataroun et al, 2008). These definition of audit quality

are from either outside audit firms or audit client perspectives. Few prior studies estimate audit quality by

using measures from inside audit firms. Audit firm are professional service organization rendering service

to companies by professional auditors Milgram and Roberts (1992) indicate that the most important

specialized input in partnership is typically the knowledge and ability of workers, that is, their human

capital. Human capital of audit firms is embodied in the expertise and experience of auditors and it is a

critical input in determining their audit quality. In the definition of Audit quality, Dé Angelo (1981) assumes
that the probability of discovering a breach is positive and fixed, implying no variation in the competency

of auditors (Niemi, 2004). In effect, auditor competency varies across and it firms due to different levels of

human capital possessed. Audit firms with skillful and proficient employees will presumably be able to

bring closer concordance of the reported earnings with generally accepted accounting principle (GAAP)

and are perceived as a high auditor quality firm (Teah and Wong, 1993). As a result, prior studies identify

some human capital factors affecting audit quality, such as educational level of auditors (Lee et al, 1999;

Liu, 1997; Yahn, 2013) and work experience of auditors (Aldhizer et al; 1995, FRC, 2006). This motivates

us to relax Dé Angelo's constant auditors competency assumption and assess audit in terms of human capital

factors of Audit firms. Audit firms can enjoy economy of scale when these sizes expands (Walts and

Zimmerman, 1986). Prior studies report a positive relationship between audit firms reinvest more resources

to advance their services quality, implying a positive relation between audit firm size and audit quality. To

examine the relation constitutes our first motivation.

A multitude of prior studies indicate that adopting total quality management (TQM) or ISO series can

improve organizational performance (Brah et al; 2000; Kunst and Lemmick, 2000; Naser et al; 2004;

Dimam et al 2004; Martinez lorente et al, 2004; soltani and Lai 2007). In contrast, some researchers find

that the implementation of TQM does not improve performance (Dow et al, 2001). Further, some studies

contend and confirm that the impact of improved quality on financial performance is primarily indirect in

nature (vector et al; 2010 - 2016). It is practicably important for the practioner to know what the effect of

Audit quality on financial performance on audit firms are. As few prior studies provide empirical evidence

for the auditing industry, examining the association between audit quality and financial performance of

Audit firms from over second motivation.

The auditing industry is requested by the SEC in the U.S by the financial supervisory commission in

Taiwan. Market segmentation exist in the industry due to government regulations or the size of clients

served (Defond et al; 2000 Ghosh and Lustgarten, 2000). Accordingly, this study classified the total sample

into three categories, including national, regional, and local audit firm.
CONCEPT OF INTERNAL AUDIT

Internal audit is a process, affected by an entity's based at directions, management and other personnel

designed to provide reasonable assurance regarding the achievement of objectives INTOSAL International

Organization of Supreme Audit Institutions, (1998). Audit quality is obtained by a process of identifying

and administering the activities needed to achieve the quality objectives of an SAI. Since an entity's internal

control is under the preview of its audit committee Kristian (2005), the relation between audit committee

quality and internal control weaknesses is a subject to be investigated. The audit committee not only plays

an important monitoring role to assure the quality of financial reporting and corporate accountability,

Corcello and Neal, (2000), but also serves as an important governance mechanism, because the potential

litigation risk and reputation impairment faced by audit committee members ensure that these audit

committee member discharge their responsibilities effectively.

We thus expect that firms with high quality audit committee are less likely to have internal control

weaknesses than firms with low quality audit committee.

CONCEPT OF AUDIT QUALITY

THE IMPORTANCE OF AUDIT QUALITY TO ORGANIZATION

The public and other stakeholders place significant reliance on governmental entities and not for profits

organizations to always act in an ethical manner and to take steps to ensure the proper use of public funds.

If you are responsible for or take part in the process to procure auditing service or your organization you

have a vital fiduciary responsibility to ensure that your audit is at the highest quality. Independent audits of

organizations like yours, including your financial statement and compliance audits (also commonly referred

to as Yellow Book audit if performed under office of management and Budget Circular A-133) are an

important accountability mechanism.

These audit provide a form of assurance to your management as well as regulators, taxpayer and donors

that your entity is in compliance with certain low and regulations governing the assistance you receive or

pregrains in which you participate. Quality financial statement and compliance audits can help you fulfill

your fiduciary responsibility.

Obtain assurance related to the financial integrity of funded programs:

Identify possible noncompliance and other issues early to avoid interpretation of current funding;

Lower the risk of future noncompliance;

Build goodwill among taxpayers, donors and other key stakeholders; and strengthen your ability to secure

additional funding in the future.

STEPS OF AUDIT QUALITY

1. Make sure the audit organization has qualified, knowledgeable staff with the right skills for your financial

statement, yellow book a single audits.

2. Grant your auditor access to all the necessary financial and program records and be sure to identify all

governmental financial assistance and federal programs in which you participate.

3. Ensure that key staff personell are available to your auditor.

4. Be actively involved- take the initiatives to understand what your auditor is doing and ask questions when

you don't. Make the most out of the exit process ask question about your auditor's work, the audit opinion,

and other compliance reports.

CONCEPT OF AUDIT INDEPENDENCE

Audit independence is defined as a condition unbiased mental attitude in making decisions throughout the

audit and financial reporting (Bartlett, 1993). The attribute of independence is a very specialized concept

for auditors. Lurking for maintaining the highest ethical standard for the accounting profession,

independence refers to the quality of being free from influence, persuasion or bias (Mary, 2000). In addition,

independent auditor is expected to be without bias with respect to the client under audit and should appear

to be adjective to those relying on the results of the audit (Mary, 2000). Similarly, auditor independence

refers to the auditor's ability to maintain an objective and impartial mental attitude throughout the audit

(Sridhara et al, 2002). In the absence of independence, the value of audit services will be greatly impaired

(Sweeney, 1992) and in tuen, If an auditor lacks independence, this increase the livelihood that they would

be perceived as fewer objectives and therefore less likely to report a discovered breach (Lowe and Penny,

1995). Compromised independence result in a lower level of audit quality being provided on financial

statement (Barber et al; 1995). In other words, if the auditor is not independent, the incentive to do a highly

quality audit is weakened, as misstatements will not be reported even if found (Pike, 2003). Little studies

have been done on direct measures perceived auditor independence and audit quality (Raymond, 2005).

This research uses direct perceived measures of those auditor independence helps to ensure quality audits

and contributes to financial statement user reliance on the financial reporting process (Lindberg and Beck,

2004)

Moreover, audit credibility can be achieved through various mechanisms of assurance, I.e assuring the

public and users that the information in a report is true and fair (Dande and Swift, 2003). It hasn't on

emergence of auditor’s lack of objectivity and professional skepticism. That is level of assurance provided

by auditor independence links to the audit credibility. The higher level of audited financial statement

assurance reliance based on higher auditor independence that its related to the author credibility. At the

result, strength of auditor independence also enhances auditor credibility (Depuch et al, 2003). This is an

important factor in the credibility of financial reporting. An auditor as a member of the accountancy
profession attitude characterized with its objectivity and integrity. He must not only be independent but to

be so at all time. I.e he or she should not be involved in relationship, financial or otherwise which may

cause doubt on his integrity.

In 1932, AICPA Council considered prohibitions against auditors serving as officers or directors of clients,

and rejected them as unnecessary. However, the proposal indicated the first concerns over a need to preserve

the appearance of maintaining objectivity, as well as being independent in fact after the securities act of

1993 was enacted, the federal trade commission issued regulation stating that it would not consider auditors

to be independent if they served as officers or directors or had any direct or indirect interest in public audit

of clients.

TYPES OF INDEPENDENCE

There are three main ways an auditor's independence can manifest itself.

1. Programming Independence

2. Investigative Independence

3. Reporting Independence

Programming Independence essentially protects the auditor's ability to select the most appropriate strategy

when conducting an audit. Auditors must be free to approach a price of work in whatever manner they

consider best. As a client company grows and conduct new activities. The auditor's approach likely have

to adapt to account for these. In addition, the auditing profession is a dynamic one with new techniques

instantly being developed and upgraded which the auditor must decide to use. The strategy/proposed

methods, which the auditors intend to implement, cannot be inhibited in any way.

While programming independence protects auditor's ability to select appropriate strategies.

Investigative Independence protects the auditor's ability to implement the strategies in whatever manner

they consider necessary, Basically, auditors must have unlimited access to all company information.

Company must answer any queries regarding a company's business and accounting treatment. The

collection of audit evidence is an essential process and cannot be restricted in any way by the client

company.

Reporting Independence protects the auditor's ability to choose to reveal to the public any information they

believe should be disclosed. If company directors have been misleading shareholders by falsifying

accounting information. They will strive to prevent the auditors from reporting this. It is in situation like

this when auditor independence is most likely to be compromised.

Real independence and perceived independence there are two important aspects to independence which

must be distinguished from each others. Independence infact (real independence) and independence in

appearance (perceived Independence)

Together, both forms are essential to achieve the goals of independence, Real independence refers to the

actual independence of the auditors, also known as independence of mind. Real independence is concerned

with the state of mind the auditor is in and how the auditors deal with a specific situation. An auditor who

is really independent has the ability to make independent decision even when there is no independence

present of it is placed in a compromising condition BH the director of the company. Similarly, an auditor's

objectivity must be beyond questions and this can be guaranteed by perceived independence which is very

important (Lindberg, D.L and Beck. F.D 2004). It also important that the auditor should not only act

independently but appears independent. If some facts suggest that an auditor is not really independent this

could lead to the public concluding that the audit report does not represent a true and fair view.

Independent in appearances also reduces the opportunity for an auditor to act otherwise than independently,

which subsequently adds credibility to the audit report.

RESTRICTION ON INDEPENDENCE

When auditors of a company are in conflict with the directors it is important this conflict can be resolved

without the auditors losing any of their independence. This can prove to be difficult as an auditor earns a

fee from providing a service, which is how he earn a living. This fee is paid by the board of directors leaving

them with the power in the relationship. Therein lies the dilemma, how can the audit team please the

directors without losing any of their independence but keep the directors happy to audit committee

independence. These findings demonstrate the internal auditors conflicting roles and question the

governance recommendations that requires all members of the audit committee to be non-executive

directors.

Alireza, Set I, Rohaida & Mohammed (2018) in their paper reviews empirical studies over the past decades

in order to assess what researchers have done about the impact of audit quality on the cost of debt capital.

Audit quality encompasses an external mechanism intended to mitigate information asymmetry by

increasing the maintaining of management's actions, limiting manager's opportunistic behavior, and

improving the quality of firm's information flows. A stream of literature explains that audit quality of

external auditor mechanisms such as auditors size, audit fees, none audit service and auditor industry

specialization are able to contribute towards improving the firm's performance and reducing information

asymmetry. The other dimension of value creation is the reduction in the cast of debt capital raised by firms.

Theoretically and empirically to some extent, high audit quality of external auditors will lead to lower firm

risk, information asymmetry and subsequently, a lower cost of debt capital. This paper aims to provide a

critical review of the empirical literature on the effect of audit quality on the cost of debt capital.

Olagunju, (2017) in his study of the independence of auditor's was critically evaluated and the importance

of auditor's independence in financial statement credibility was analysed. In order to make informed

decision it is important for the financial statement to be credible. The auditors are expected to audit the

financial statement of company's in order to present true and fair view or otherwise of the financial
statement. The data used for this work were collected from both primary and secondary sources. The

relevant data collected were analyzed using simple percentages and tables and tested using Chi-Square. The

results of the test show the auditor's independence affects the credibility of financial statement and the

improvement in the credibility of the financial statement can reduce manipulation in the financial statement.

The reason why audit exist is because investors and creditors can make use of financial statement to make

their decisions. The study concluded that auditor's independent and the credibility of financial statement

are to laws differ from country to country so also an audit of the financial statement of a public company is

usually required for investment, financing and take purpose which are usually done by independent

accountant or an auditing firm. The audit opinion on the financial statement is usually included in the annual

report. There has been a legal debate over who auditor is liable to either to shareholders or investors. But

in Canada, auditors are liable to investors who use prospect to buy shares in the primary market. In the

United Kingdom, they have been held liable to potential investors when they are aware of how the potential

investor would use the information in the financial statements in the United States, especially in the post-

Enron era there been substantial concern about the accuracy of financial statement. The chief executive

officer (CEO) and chief financial officer (CFO) are liable for attesting that financial statement do not

contain untrue statements of material fact necessary to make the statement under any circumstances must

not be misleading with respect to the period covered by the report. For example, former CEO of WorldCon

Bernie Ebbers was been sentenced to 25 years imprisonment due Worlcon's revenue to be overstated by

$11billion dollars over five years future development.

CONCEPT OF AUDIT QUALITY

Audit quality is defined as the probability that an auditor will both discover and truthfully report material

errors, misrepresentation, or ommision in the client's material financial statement (Deangale, 1981). Audit

quality been defined in numerous means. Some of the more frequently definition of audit quality include

1. The probability that an auditor will both discover an untruthfully report material errors,

misrepresentation, or omissions in material financial statement (Deangale, 1981).

2. Probability that an auditor will not issue an unqualified report for statement containing material errors

(Lee et al, 1999)

3. The accuracy of auditor's information reporting (Davidson and Neu, 1993)

4. Measure of the audit's ability to reduce noise and bias and improve meticulous in accounting data

(Wallace, 1980)

The audit service is the provision of independent verification of the credibility of financial statement to

users. In order to ensure that the audit enhances the credibility of financial statements, it must be reluctant

to take actions that would be adverse to the interest of the audit firm?

This arises when the result of non-audit service is performed by the auditors or by others within the audit

firm are included in the figure disclose in the financial statement. The apparent difficulty of maintaining

objectivity and conducting what is effectively a self-review if any product or judgement of a previous audit

assignment or non-audit assignment needs to be challenged or reevaluated in reacting audit conclusion.

We have many other threats that can question the independence of an audit which include (Whitaker A.M,

2006): familiarity threat, advocacy threat, intimidation threat and management threat.
EVOLUTION OF FINANCIAL STATEMENT

The earliest attempts to record information date back to 3500BC, when it was thought necessary to record

payments made to armies of the Egyptian Pharaohs. Payments were not in terms of money but by means of

cattle, sheep, precious stones e.t.c via trade by barter system. Records of this early civilization were erratic

in their form, but this was to be expected, given the absence of any adequate system and monetary level of

trade. This made it possible for transaction to be recorded not as many pounds of silver, cowries e.t.c but

in terms of a consistent measure of value.

The evolution dramatically changed by the founder of doubted entry book keeping system.

Luca Pacioli, in his famous "Dé summa" q treatise on mathematics and bookkeeping the idea of double

entry bookkeeping was enunciated which allowed concepts such as trial balance and balance sheet to

emerge. Due to expansion of trade provided the ground for.

CLASSIFICATION OF FACTORS AFFECTING THE AUDIT QUALITY

There is relatively a wide range of factors that may affect the quality of auditing. As the number of factors

affecting the auditing quality is relatively high, there are also various classifications of these factors

according to the different auditors and entities. Some auditors divide in two main groups the factors that

can affect the audit quality in direct and indirect measures. Direct factors include factors that are related

with the audited company like financial reporting adopted with IAS quality control reviews, company

performance, earning quality e.t.c. Indirect measures contains factor related to the auditing company and

supervising board for auditing quality still these mechanisms are not enough active and proportionally

sufficient in establishing the observance of these rules, including auditor's ethics and quality.
2.3 THEORETICAL FRAMEWORK

2.3.1 THE AGENCY THEORY

Agency theory provides a useful way of explaining relationship where the parties interest are at odds and

can be brought more in to alignment through proper monitoring and well planned compensation system"

(Davies et all, 1997,24) according to the authors however, to explain other type of human behavior the

model of man is based on a steward whose behavior is ordered such that pro organization, collectivistic,

self-serving behavior the stewardship theory defines situation in which manager are not motivated by

individuals goals. They father steward whose motive with the objectives of there are aligned.

2.3.2 STEWARDSHIP THEORY

According to Donaldson and Davis (1991), stewardship theory holds that there is no inherent, general

problem of executive motivation. "The executive manager, under this theory, far from being an

opportunities shirker essentially wants to do a good job, to be a good steward of the corporate assets."

According to steward theory, performance variations arise, not from inner motivation problems among

executives, but from whether the structural situation in which the executive is located facilities effective

action by the executive (Donaldson and Davies, 1991, 51).

Stewardship theorist assumes a strong relationship the success the organization and the principal's

satisfaction. A steward protects and maximize shareholder's wealth through firm performance, because, by

so doing, the steward utility function are maximize (Davies et all, 1997). Stewards are motivated by

extrinsic rewards. The individual goals stewards as opposed to the agent, place greater value on collective

rather than individual goals. The steward understand the company's success as his own achievement

according to Davies et al., (1997, 37) the primary difference between agency theory and stewardship theory

lies in the assumption about human nature. According to the stewardship theory people are collective self-

actualizers who achieve utility through organization achievement.

The agony model assumes principal agent relation in which differing motives and information. Within the

agony theory the role of the audit is to reinforce trust and confidence in financial reporting. Unlike the

agency theory, the stewardship theory holds that no inherent general problem of executive motivation exist

the model of man is based on a steward whose behavior is pro organization and collectivistic.

Following the basic thought of stewardship theory, there is no need of implicating monitoring mechanism.

There is no need of engaging audit service in order to secure the reliability of information. However, within

stewardship theory an audit could be of value as a means of assisting the executive's stewardship. According

to stewardship theory, the executive manager places greater value on collective rather than individuals

goals. The executive is motivated to be good steward of corporate assets and an audit could help to express

good stewardship displaying audited statement, the steward express truth and fairness.

2.3.3 LEGITIMACY THEORY

Legitimacy theory attempts to explain the survival and growth of organization based on the need to acquire

and maintain the support of its constituent stakeholders. It links stakeholder support with the alignment of

organizational goals and those of groups and society in general.

The concept of requiring support is similar to the idea of external control as described in resources

dependency theory (RDT) (Hillman, Withers & Collins, 2009) the chief difference between them is that

legitimacy is more a state of mind or a perception, when is difficult to measure apart from its consequence

RDT, Instead, links materials resource needs of the organization to its behavior, such as merger and

acquisition behavior. Legitimacy theory is increasingly being applied in accounting and auditing and

auditing research particularly in situations involving the public disclose of information (Deegan, 2006;

power. 2003). Most recently a number of papers have employed this framework with environmental and

social accounting issues and corporate sustainability reporting (Chiang, 2009). Legitimacy theory is more

appropriate to the current study because it facilitates and expanded definition of stakeholders, and it support

a substantive or symbolic explanation of internal audit's influence over organizational governance.

2.4 EMPIRICAL REVIEW

Several studies have been carried out by many researchers on impact assessment of audit quality based on

the firm.

Marsel and Ali (2021). The objective of their paper was to study how various internal and external factors

like audit firm culture, quality of people, management and audit committee as well as general cultural and

political factors affects the audit quality in Albania. Identifying the main factor that can improve the

auditing quality in Albania can contribute to understanding of how the Albanian auditors adopt the auditing

standards to accomplish the quality control and other related reporting responsibilities. The study was

widely based on international standards on auditing and assurance engagements to identify the main factor

affecting the quality control of auditing according to most popular and used classification. The objective of

their study was complicated by analyzing the views from the respondents (CPA and Independent auditors)

obtained from the utilization of the questionnaires and interviews as well as the usage of foreign and

national literature.

Yaha-shir, joseph, Mei-Ting and Ping-Sen (2021), their study examines the relations between audit quality,

audit firm size, and financial performance. Their study estimates audit quality of audit firms from human

capital related factors, such as educational level of auditors, work experience of auditors, and professional

training. From the perspective of market segmentation, the sample is divided into three categories of audit

firms. The positive relationship of natural audit firms is higher than that of regional and local audit firms.

This relationship between audit quality and financial performance is positive. The positive relationship of

natural audit firm is higher that of regional and local audit firms.

Mariam and Maxim (2019) explores whether the relation between internal audit quality and firm

performance is associated with firm characteristics of information asymmetry and uncertainty (growth

opportunities) and certain governance controls (audit committee effectiveness). The results from this

preliminary study of 60 Malaysian companies shows that the association between internal audit quality and
firm performance is stronger for firms with high growth opportunities and that positive association is

weakened by increasing sufficient audit quality (Sucher et al; 1998) and in turn, audit credibility (Graynon,

2008). Financial statement users will change assessment of audit quality based on new publicly available

information about an auditor (Dopuch and Simuni, 1982). New information, susch as audit independence,

may be lower perceived financial statement reliability and thus, the perceived quality of audit service

provided (Palmrose, 1988). In other words, high-quality auditors (Wong 2005). The higher audit quality

generates the higher the information credibility and information quality that has impact on the higher quality

of financial statements and that means auditors with high-quality and high-credibility (Walking et al; 2004)

in accounting context, higher audit fees are reflected by higher costs that have to infer that this higher cost

result in greater audit quality. Hence, the auditor should have a higher reputation as a result (Moize, 1997).

The link of the relationship between the relationship between the reputation and the audit quality is provided

by economic theorist such as Klein and loffler (1981) and shapins (1982).

The essence of their argument is that individual has an economic incentive to incur above average costs in

order to produce a service limitation: many have advocate that in order for an auditor to remain independent

they should not be allowed to provide audit clients with any other advising service.

Both auditors and their clients have argued that the knowledge acquire during the audit process allow other

services to be provided less expensive.

Audit committees: the motion to form audit committee was first made in the cadbury report (1992). A group

of three to five non-executive directors from within the company are chosen to provide what is supposed

to be an objective view on all aspects of the audit from the evaluation of internal control system to

recommendation on audit fee. Through the cadbury report this practice has been implemented and many

are still not convinced of the neutrality of non-executive directors peers review or assessment: this is a new

audit approach and it is not common in Nigeria. It involves a review of an audit firm system, procedure and

strategies by another audit firm of comparable size reputation and standard. This is a requirement in the use
that be significantly impaired when non-audit service are conducted and that there is a positive relationship

between independence of an auditor and the credibility of financial statement, therefore the independence

of an auditor is fundamental to the credibility of financial statement. Finally, the study recommends that

there should be rotation of auditors to improve the auditor's independence, implementation of peer

assessment in other to ensure that audit are carried out with outmost professionalism and mutual respect

and that auditors should not be allowed to provide audit client with any other advisory services.
 CHAPTER THREE
RESEARCH METHODOLOGY
3.1 PREAMBLE
This chapter focuses on the procedures adopted to achieve the objective of the research study. It
describes the study population and sampling method, data collection techniques as well as method
used for data analysis.

3.2 Research Design

This is the step by step process of carrying out this research work, it is a plan that a
researcher adopt to answer question correctly. The phase of this worked involves a design of
procedure that guided the researcher in data collection which is the hall mark for any research. The
research designed used for this work shall based on the view that case study allows flexible data
collection (Guba and Lincoln, 2005, Heltz 2007, Yin 2003), it is designed to find out the extent to
which in sourcing will promote.

3.3 Population of the study

The population of this research work covered the admin, finance and internal audit
department of Tuyil pharmaceutical Ltd. Which is 50, according to Belly (2005) if the population
is not more than 50, then you have to study all therefore, for the research all were studied and there
was no need for sample size.

3.4 Sampling Size and Sampling Technique

The sample size and sampling techniques used as main source of information for this
research work title "assessment of audit quality assurance on firm's performance in Nigeria" was
structural questionnaire based on a five point psychometric likert scale.

According to Olorunfemi (2004), questionnaire is a sequence of question designed to

collect data on a specified subject, usually from respondent.

The researcher made use of 50 questionnaire which was distributed to the staff of admin,
finance and audit staff at Tuyil pharmaceutical Ltd. In a simple random sampling. The
questionnaire were use in two (2) sections.
 Section 1: This contain the respondent bio-data I.e general information about the
respondents and respondent’s organization seeking the demographic characteristics of the
respondent.

Section 2: This deals with questions that are directly related to the variable factors stated
objectives I.e. questions and hypothesis for the purpose of this research work eliciting suggestions
for managing financial information. The section consisted of 20 simple scale questions on the
assessment of audit quality on firms performance. The data collection adopted the closed ended
structured questionnaire. The statement was phrased with a possible response continuous based on
5 point psychometric likert scale questionnaire:

5 - Strongly Agreed (SA)

4 - Agreed (A)

3 - Indifference (I)

2 - Disagreed (D)

1 - Strongly Disagreed (SD)

3.5 SOURCES AND METHOD OF DATA COLLECTION

To perform content validity and collecting data for the study is under investigation. There some
methods range from simple self-reported surveys to more complex experiments and can involve
either quantitative or qualitative approaches to data gathering. Some common data collection
methods include surveys, interviews, observations, focus groups, experiments, and secondary data
group analysis. To ensure validity during that data collection. It is imperative, the aim of data
collection procedure is to assist the researcher with solution on problems earlier identified. The
specification or classification of data were used for information collection for those studies were
primary and secondary based on research issue at hand. Primary data were collected specifically
for research need at hand. They are data which were collected for the first time. They can be
gathered either from customer’s knowledgeable people or other information sources. The primary
data which will be filled by staffs of the selected accounting firms.

Also, for this research, the researcher is only restricted to the staffs of its chosen case study.

Secondary data are collected specifically for some purpose other than which they were originally
collected. The secondary data is from extract and deductions from textbook, journals,
pronouncements of professional bodies and pronouncement of various medias. This information
is already in existence, which have been collected for the purpose of specific research needs prior
to this research work.
3.6 INSTRUMENTS OF DATA COLLECTION

Data for study were collected through primary source using questionnaire. The questionnaire was
administered to respondents by the researcher copies of the questionnaires were retrieved after
they were completed. The direct administration method adopted by the researchers afforded them
the opportunity to ensure that all the respondent issued with the instrument returned same day. All
the copies of the questionnaire issued were complicated and duly returned.

3.7 TECHNIQUES FOR DATA ANALYSIS

In this study, each of the hypotheses, already aforementioned will be statistically tested by the
responses to the research work through answer gathered via questionnaire.

The data analysis will be done using descriptive analysis involves the use of percentage (%), while
the inferential analysis method covers the use of parameteric T test and it's equivalents which is
Chi-square should the data is not normally distributed to analyze the hypothesis which would be
statistically tested by grouping the response of the research work into the answers gathered via the
questionnaire with the use of statistical package for social science (SPSS)

The formula of chi-square is;

X2 = E (oi - ei)2
ei
Where: Oi = observed frequency

Ei = expected frequency

The level of significance and the degree of freedom are the criteria for the rejection of hypothesis.
The formulated hypothesis were tested by comparing the calculated value of the chi-square to the
tabulated value at 5% significant level at the appropriate degree of freedom.
 CHAPTER FOUR

ANALYSIS AND DISCUSSIONS

4.1. PREAMBLE
Analysis and interpretation of result and data obtained out in this chapter so as to determine
the outcome of the research hypothesis, based on the result derived. Data was collected through
the administered structured questionnaire chi-square statistical was used for the analysis of the
data.

4.2 RESPONDENT CHARACTERISTICS AND CLASSIFICATION

Distribution of respondent used in the study is according to their age, gender, management
level, educational qualification and professional qualification.

4.3 PRESENTATION AND ANALYSIS OF DATA ACCORDING TO RESEARCH

The research hypothesis tested with chi-square statistical method by including related responses
derived from the administered questionnaire into each hypothesis are presented below

Age distribution of respondents

FREQUENCY PERCENT VALID CUMULATIVE

PERCENT PERCENT
18 - 30 8 18.6 18.6 18.6
31-40 28 65.1 83.7 83.7
41-50 7 16.3 100.0 100.0
Total 43 100.0

Gender

MALE 33 76.7 76.7 76.7

FEMALE 10 23.3 23.3 100.0
TOTAL 43 100.0 100.0
ACADEMIC QUALIFICATION OF THE RESPONDENTS
FREQUENCY PERCENT VALID PERCENT CUMULATIVE PERCENT
SSCE 20 46.5 46.5 46.5
DIPLOMA 14 32.6 32.6 79.1
HND/BSC 5 11.6 11.6 90.7
MASTERS 4 9.3 9.3 100.0
TOTAL 43 100.0 100.0

POSITION
FREQUENCY PERCENT VALID CUMULATIVE
PERCENT PERCENT
LOW LEVEL 17 39.5 39.5 39.5
MANAGER
Middle manager 18 41.9 41.9 81.4
High manager 8 18.6 18.6 100.0
Total 43 100.0 100.0
Source: Field survey, 2023

The table above depicts that 65.1% of the respondent are from 31-40 years of age, 18.6% are from
18-30 yrs of age and 16.3% are from 41-50 years of age showing the combined response obtained
from 50 workers, 76.7% are male and 23.3% are female. This implies that the gender distribution
of the selected personnel is titled towards the male, 46.5% of the respondents are SSCE holders,
32.6% of the respondent are diploma holders HND 11.6% and masters holder are 9.3% when
implies that 46.5% will have significant influence, 39.5% of respondent are low level managers
and this connotes that middle managers have significant influence.

4.4 ANALYSIS OF OTHER DATA

4.5 TEST OF HYPOTHESIS/ANSWER TO RESEARCH QUESTIONS

H0: Lack of auditors independent does not contribute to low audit quality.

H1: Lack of auditor's independent significantly affect low audit quality?

Test Statistics

N 43
Chi-square 27.344
DF 2
Asymp. Sig 1.000
X² Tabulated 4.7933
Sig. Level 5%
Source: Field Survey, 2023
A. Freedom Test

All staff of Tuyil pharmaceutical ltd are aware 3.11

of the existence of internal audit
Internal Audit of Tuyil pharmaceutical ltd is 2.98
functional
Internal Audit contribute to effectiveness and 3.56
efficiency of Tuyil pharmaceutical ltd
operations
Internal Auditors issues report on the 3.07
effectiveness and efficiency of Tuyil
pharmaceutical Ltd operations

Decision rule
We reject null hypothesis if X² calculated is >X² tabulated and we accept the alternate hypothesis.
Otherwise, we accept null hypothesis and reject alternate hypothesis. Since the calculated value of
X² is greater than the critical value, we therefore post that internal audit significantly affects quality
of Tuyil pharmaceutical Ltd performance.

TEST OF HYPOTHESIS TWO:

H0: Internal Audit does not significantly affect the decision made by users of Tuyil pharmaceutical
Ltd financial statement.

H1: Internal Audit significantly affects the decision made by users of financial statement.

TEST STATISTICS
N 43
chi-square 25.813
Df 2
Asymp. Sig 1.0234
X² Tabulated 4.7433
Sig. Level 5%
Source: Field survey, 2023

A. Friedman Test

Division rule
We reject null hypothesis if X calculated is >X tabulated we accept the alternate hypothesis
otherwise; we accept null hypothesis and reject alternate hypothesis. Since the calculated value of
chi-square is greater than its critical level, it implies that internal audit significantly affects the
decision made by users of financial statement.

TEST OF HYPOTHESIS THREE:

H0: Internal Audit does not significantly affect the credibility of financial statement.

H1: Internal Audit significantly affects the credibility of financial statement.

Friedman Test

Rank
Mean Rank
Internal Audit report leads credibility of financial statement of Tuyil 2.12
pharmaceutical Ltd
Strict adherence to the policies instituted by internal auditor's provide check 2.80
for Tuyil pharmaceutical ltd transaction
Report of Internal Audit has significantly impact on the quality of Tuyil 2.32
pharmaceutical ltd financial statement.
Internal Audit report corroborates the report issued by the external auditor 2.77
Source: Field survey, 2023

TEST STATISTICS
N 43
Chi-square 37.324
Df 3
Asymp. Sig 1.012
X² Tabulated 7.8147
Sig. Level 5%

Rank
Mean Rank
Internal Audit report leads credibility to finance statement of Tuyil 2.12
pharmaceutical Ltd
Strict adherence to the policies instituted by internal auditors provide 2.80
check for Tuyil pharmaceutical Ltd transaction
Report of Internal Audit has significantly impact on the quality of 2.32
Tuyil pharmaceutical Ltd financial statement 2
a. Freedom Test
Source: Field Survey, 2023
Decision rule

We reject null hypothesis if X² calculated is >X² tabulated we accept the alternate hypothesis
otherwise, we accept null hypothesis and reject alternate hypothesis.

4.6 SUMMARY OF FINDINGS

The study reveals that effective internal auditor independence has impact on Audit quality in
organization as the result shows that X² at 0.000, 0.0234, 0.012 < 0.05 level of significance. We
therefore rejected the null hypothesis and accepted the alternate hypothesis that organization
performance can be improved through effective audit quality. This result according to the agency
theory is expected as the theory is subject to effective representation of principal and the agent.
Here the Auditor is seen as the agent who needs to represent the interest of his principal. Also the
result of Abdul, Sadjito & Budi (2014) reveal that internal quality process has impact on the growth
of quality culture in private college. Consequently, Yahn-shir, Joseph, Mei-Ting and Ping-Sen
(2013), their study examines the relations between audit quality, audit firm size, and financial
performance. Their study estimates audit quality of audit quality of audit firms from human capital-
related factors, such as educational level of auditors. The work of Marian & Mazlina (2014)
explores whether the relation between internal audit quality and firm performance is associated
with firm characteristics of information asymmetry and uncertainty (growth opportunities) and
certain governance controls (audit committee effectiveness).
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary or Synopsis of the study including a comprehensive summary of major
findings.

This study assesses the impact of Audit quality assurance on firm's performance. Adopting Tuyil
pharmaceutical Ltd Ilorin as case study and in so doing starting the effectiveness and efficiency of
audit quality assurance in Tuyil pharmaceutical Ltd.

The findings of the study examine the extent to which internal audit quality enhance Tuyil
pharmaceutical Ltd performance.

Internal Audit has enhanced the decision of 58.5% of the respondent strongly agreed that internal
audit has enhanced the decision of user of Tuyil pharmaceutical Ltd finance statement.

The report issued by internal audit has improved investor's confidence in Tuyil pharmaceutical Ltd
as 74.4% of the respondents agreed that the report issued by internal audit has improved investor's
confidence in Tuyil pharmaceutical Ltd as 69.8% of the respondent agreed that leads credibility to
financial statement of Tuyil pharmaceutical Ltd.

Strict adherence to the policies instituted by internal audit provide check for Tuyil pharmaceutical
Ltd transaction as 76.8% of the respondent agreed that strict adherence of the policies instituted
by internal audit provides check for Tuyil pharmaceutical Ltd operations.

5.2 CONCLUSION

Based on the result derived from the study, we can deduce that internal audit has significant impact
on quality of firm's performance. The existence of internal audit in Tuyil pharmaceutical Ltd is to
ensure that internal audit is implemented in firms; Internal Audit has helped firms in achieving
their objectives which is to develop confidence in the shareholders and investors.

Good internal audit serves as road map for improved performance of a firm. It also ensures that
internal control procedures of firms are well stated and followed.

While internal audit ensures the effectiveness and efficiency of firms operations. It equally focuses
on the stability, effectiveness of financial statement and strong financial performance of Tuyil
pharmaceutical Ltd. Internal Audit also enhance the integrity of firm by carrying out regular review
of the reporting system and financial records of firms.

This study is in line with the stewardship model, which states how the responsibility of the
management is to be identified including the non-executive's member. This means,
implementation of good internal audit in firms will definitely states the responsibility of
management without any dual responsibility. Which is performing more duties meant for another
manager or executive. Therefore, proper implementation of internal audit will greatly strengthen
banks firm performance.

5.3 RECOMMENDATION BASED ON THE CONCLUSIONS

Consequent to our findings in thus study regarding the impact of internal audit on quality of Tuyil
pharmaceutical Ltd performance, we therefore, recommend the following:

I. Management should ensure adequate composition of auditors. The auditors should be composed
of equal numbers of non-executive directors and shareholders subject to a maximum number of
six (6).

II. Management should ensure that members of the internal audit are allowed to carry out their
duties without interference.

III. Internal Audit should ensure that firms follow the procedure for implementing quality financial
statement.

IV. Internal Audit should regularly and consistently conduct review on firm's operations.

5.4 CONTRIBUTION TO KNOWLEDGE AND SUGGESTION FOR FURTHER STUDIES

This study was carried out to highlight the impact of internal audit on an organization specifically
firms in terms of financial reporting. It has also shown the importance of internal audit in financial
reporting for improvement of financial performance and how they want to be viewed by their
shareholders. Further research work should be carried out on the challenge of internal audit
implementation.
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