Audit Tenure And Audit Fees Behaviour In Nigeria: A Case Study Of Nigeria Banking Sector

The broad objective of the study is to examine the relationship between auditor tenure and audit fee. Intuitively, one may not be able to say dearly if audit fee influences audit tenure or the reverse holds as there are theoretical justifications and explanations to  expect both possibilities. Where such possibilities exist between two variables, it therefore introduces a special case of dual causality. Specifically, the study examines the degree and direction of the relationship. In addition, the study examines if auditor tenure granger-cause audit fee or If audit fee granger-cause auditor tenure. The simple random sampling technique was employed in selecting the four banks for the study for the period 2006-2010 which gives twenty data points. The secondary data will be retrieved from financial statements of the sampled companies. Partial correlation analysis and the Granger causality test where utilized as the method of data analysis.  The findings of the study indicates that without controlling for client characteristics i.e. firm size and return on equity, the relationship between audit tenure and audit fee is negative. The relationship between auditor tenure and audit fee controlling for client characteristics also appeared to also be negative. It is observed from the granger- causality test results that the null hypothesis that auditor tenure does not granger-cause audit fee is accepted and this suggest that the alternative hypothesis that auditor tenure granger-cause audit fee is rejected. In addition/ from the evaluation of granger-causality result it is observed that the null hypothesis that auditor fee does not granger-cause auditor tenure is rejected and this suggest that the alternative hypothesis that auditor fee granger cause auditor tenure is accepted. The implication of the granger-causality finding necessitates the recommendation that audit fee could have significant causal effects on auditor tenure and hence in attempting the model the behaviour of auditor tenure, the study recommends that considerable attention be given to audit fee.

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