Abstract

This study examines the effect of audit quality on share prices of Nigerian oil and gas firms using the regression and covariance analyses. Findings from the regression anlysis suggests that the composition of the audit committee and auditor type has significant effect on the market prices of quoted firms. There is a positive and significant relationship between audit committee composition and share prices. The covariance analysis suggests that while auditor type (BIG4/NONBIG4), auditor independence, and composition of the audit committee have a positive and significant relationship with market price of shares,  tenure of  external auditors has a negative relationship with the market price of shares. The implication of the findings is that audit quality will enhance reported earnings and hence the share market prices. The study recommends that firms should strive to associate with the BIG4 external auditors in Nigeria as such an association could enhance the credibility of the audit process and by extension their share prices; regulatory authorities should discourage joint audit and non-audit services to firms because it could threaten the independence of external auditors. Regulatory agencies should also present distinct statements on the tenure of the external auditors to be clearly stated in annual reports. This is because a long attachment between the external auditors and a client may threaten the independence of the external auditors.

Key words: Share-prices, audit-quality, auditor-independence, auditor-type.