Audit Quality and Corporate Tax Avoidance Among Listed Non-Financial Firms in Nigeria: Moderating Effect of Board Diversity

Abstract

This study investigates the moderating effect of board diversity on audit quality and tax avoidance among listed Nigerian non-financial firms. The study employed expo-facto research design, and the population comprises of all 106 non-financial firms listed on the Nigeria Exchange Group (NGX) from 2012 to 2022. Using purposive sampling technique, 71 companies having adequate information for the study were selected. The study gathered data from the annual reports of the selected firms. While audit quality (AQ) was measured by Audit fees and Auditor independence, and tax avoidance was proxied with effective tax rate. Dynamic panel system GMM was utilised to analyse the data. Results revealed that the moderating effect of board diversity and audit quality (proxied with Audit fees and audit firm independence) on ETR maintained a positive but not significant at 5% level (t=0.56; p>0.05 & t=0.61; p>0.05) suggesting that board gender diversity does not moderate the impact of audit quality (Audit fees and audit firm independence) on the ETR of sampled Nigerian listed non-financial firms. Implying that having expert auditor is of utmost importance to the firm. Result shows that control variables, ROA and MGO (t=1.86; p>0.05 & t=2.51; p>0.05) maintained a positive non-significant effect on ETR, while LEV and SIZ (t=-6.36; p>0.05 & t=-1.38; p>0.05) maintained a negative non-significant effect on ETR. Hence, the research recommends that relevant regulatory bodies should encourage firms to engage specialized auditor to limit their tendency of practicing tax avoidance.