Internal Auditing and Financial Performance of Listed Insurance Firms in Nigeria

Abstract

Despite growing pressure from stakeholders for greater transparency, many insurance firms struggle to integrate internal auditing into their decision-making processes. This study therefore examined the effect of internal auditing on financial performance of listed insurance firms in Nigeria with specific attention on the effect of operational audit, compliance testing and risk assessment on financial performance among the firms. The study employed ex-post facto research design on a population of 21 listed insurance firms in the Nigerian Exchange Group as of December 31, 2023 over a period of 10 years from 2014- 2023. Secondary data were collected from the published annual reports of 12
purposively selected listed insurance firms. Data collected were analysed using descriptive and inferential statistics. Panel data regression model was used in the study. The findings revealed that operational audit has a significant negative effect on the return on equity of the listed insurance firms in Nigeria during the period under study. Compliance testing has
a significant positive effect on the return on equity of the listed insurance firms in Nigeria during the period under study. Risk assessment did not have a significant effect on the return on equity of the listed insurance firms in Nigeria during the period under study. The study concluded that internal audit has a significant effect on the financial performance of
listed insurance firms in Nigeria. It is recommended that listed insurance firms in Nigeria should consider optimizing operational audit processes to ensure they do not impede operational efficiency, support initiatives that encourage firms to adopt best practices in compliance testing and advocate for a more integrated approach to risk assessment within
firms.

Keywords: compliance testing, internal auditing, operational audit, risk assessment