Audit quality and financial performance in Rwandan listed companies: a case of bank of Kigali and BRALIRWA Plc

Abstract

This study is entitled “Audit quality and financial performance in Rwandan listed companies: a case of bank of Kigali and Bralirwa Plc)” This research examined the audit quality and financial performance in Bank of Kigali and Bralirwa Plc. The specific objective of this study was: to ascertain the impact of auditors’ input on financial performance in listed companies in Rwanda, to examine how the audit process affect financial performance of listed companies in Rwanda., to analyze to which extent the outcome of the auditor’s activities influences financial performance of listed companies in Rwanda and to assess how audit context affects the financial performance of listed companies in Rwanda. The study adopted descriptive research in order to assess the impact of audit quality to financial performance. The sample size of this study was 224 respondents from both organizations. The data collection was done using questionnaires as primary data and organizational financial statement as the secondary data. The study used descriptive statistics and inferential statistics such as correlation analysis and multiple linear regression analysis. The findings revealed that audit input has significance positive effect on financial performance measured by ROA as stated by β1= 0.172, p=0.009<0.05. The results showed that audit process has significant positive effect on financial performance measured by ROA as determined by β2= 0.482, p=0.000<0.05. The findings revealed that audit outcome has significant positive effect on financial performance measured by ROA as indicated by β3= 0.455, p=0.000<0.05. The findings revealed t that audit context has significance positive effect on financial performance measured by ROA as shown by β4= 0.139, p=0.008<0.05. The results showed that 1 per cent increase in audit input, audit process and audit outcome will lead to 0.079; 1.029 and 2.371% increase on ROE while 1% increase in Audit context will lead to .038% increase on ROE but not significant. The findings revealed that 1 per cent increase in audit process and audit outcome will lead to 4.327; 1.029 and 2.433% increase on net profit margin while 1% increase in audit input and audit context will lead to 0.160 and 1.751% increase on net profit margin but not significant. Thus, the study recommended that an organization also has to increase the way employees have trust in the capacity of audit firms in delivering the audited reports to enhance the financial performance of the organization by giving the employees to provide the input before the report validated.