Analysis of effects of data analytics and political connection on audit quality of listed financial institutions in Nigeria

Background: Persistent issues with audit quality in financial reports of listed financial institutions in Nigeria have eroded stakeholders’ trust, with existing literature yielding inconsistent findings on its determinants. Therefore, data analytics and political connection enhance audit quality of this crucial sector of the economy.
Aim: This study examined the determinants of audit quality among Nigeria’s listed financial institutions. It specifically aimed to: examine the combined effects of data analytics measured by descriptive analytics, diagnostic analytics and cognitive analytics influence the audit reporting quality. Also, to determine how political connection moderates the relationship between data analytics and audit quality of Nigeria listed financial institutions.
Methodology: The study employed a quantitative research design. The population comprised 220 internal and external auditors from 47 listed financial institutions in Nigeria. Using a census sampling technique, secondary data (2012-2023) were collected and primary data were gathered via structured questionnaires. Data were analyzed using Ordinary Least Squares (OLS) regression and Structural Equation Modeling (SEM).
Findings: Descriptive analytics (β= 1.1313, p = 0.001), diagnostic analytics (β = 0.6249, p = 0.009), and cognitive analytics (β = 0.1837, p = 0.045) individually increased audit quality, but the aggregate of all data analytics did not (β =-0.8518, p =0.088). Meanwhile, Political connection had significant negative moderating effects on the relationship between data analytics and audit quality of listed financial institutions in Nigeria (β = -0.043, p = 0.041).
Contributions: The study provides empirical evidence on the nuanced effects of specific data analytics types such as, descriptive, diagnostic and cognitive data analytics on audit quality in an emerging market context. It introduces and validates the significant negative moderating role of political connection, a crucial contextual factor in developing economies like Nigeria.
Recommendations: Policymakers should introduce regulations to limit political influence in the auditing process, particularly for listed financial institutions. Firms should focus on specific, value-adding analytics and robust audit planning to enhance audit quality amidst Nigeria listed financial institutions.
Implications: Theoretically, the study refines understanding of audit quality determinants by disaggregating composite variables like data analytics and by introducing political connection as a key boundary condition. Practically, it highlights the risk political influence poses to audit integrity and the need for safeguards. The findings are particularly relevant for developing economies with similar institutional environments.
Researchers: Future research could explore the specific mechanisms through which political connection undermines audit quality and investigates these relationships in other sectors and countries.