The Economics of Audit Fees: Exploring Factors and Trends in Nigerian Banks

Feranmi Olaseinde

Feranmi Olaseinde

Jul 27, 20233 min read


The Economics of Audit Fees: Exploring Factors and Trends in Nigerian Banks


In the dynamic world of finance, auditing is an essential practice that ensures transparency and accountability. Nigerian banks, in particular, have been actively engaging auditing firms to conduct financial audits. In the first quarter of 2023, seven commercial banks listed on the Nigerian Exchange Group collectively paid a staggering N1.39 billion to auditing firms, including PwC, KPMG, EY, and Deloitte. This article explores the factors that influence audit fees and sheds light on the top bank in terms of audit costs.

Understanding the Role of Audit Firms:

Audit firms play a crucial role in assessing the financial health of companies. In exchange for their services, they receive payment from businesses. While some companies undergo financial audits twice a year, others opt for annual audits. These audits serve as a comprehensive evaluation of a company's financial statements, internal controls, and adherence to regulatory requirements.

Factors Influencing Audit Fees:

Several factors influence the audit fees charged by these firms. Among the most significant factors are the size of the company, industry, corporate risk, profitability, and the duration of the audit. Larger companies often have more complex financial structures, requiring auditors to invest more time and resources in conducting thorough audits. Similarly, industries with higher regulatory scrutiny, such as banking, may entail higher audit fees.

The Top Bank in Terms of Audit Costs:

Access Holding Company, a tier-one bank, emerged as the top bank in terms of audit costs for the first quarter of 2023. The bank paid an impressive N606 million to PricewaterhouseCoopers (PwC). This payment reflects the bank's commitment to upholding transparency and ensuring the accuracy of its financial reports. Access Holding Company's decision to engage a reputable auditing firm like PwC demonstrates their dedication to maintaining high auditing standards.

The Impact of Audit Fees on Financial Institutions:

While audit fees may seem substantial, they are a worthwhile investment for financial institutions. High-quality audits provide invaluable insights into a company's financial position, risk management strategies, and compliance with regulatory frameworks. Furthermore, audits enhance investor confidence and contribute to the overall stability of the banking sector. By identifying potential areas of improvement, audits enable banks to mitigate risks, improve operational efficiency, and unlock growth opportunities.

Actionable Advice for Banks:

  • 1. Prioritize Transparency: Embrace a culture of transparency within your organization. This includes maintaining accurate and up-to-date financial records, implementing robust internal controls, and openly communicating with auditors. Transparency not only facilitates the audit process but also fosters trust among stakeholders.
  • 2. Invest in Risk Management: Recognize the importance of effective risk management. By proactively identifying and addressing potential risks, banks can minimize the likelihood of financial misstatements and regulatory non-compliance. Engage auditors in risk assessment exercises to gain fresh perspectives and insights.
  • 3. Evaluate Audit Costs: While audit fees are necessary, it is prudent for banks to periodically assess the reasonableness of the costs involved. Conduct a cost-benefit analysis to ensure that the services provided by auditing firms align with your institution's requirements. Consider exploring alternative audit service providers or negotiating fees to optimize cost-efficiency.


The payment of N1.39 billion by Nigerian banks to auditing firms in the first quarter of 2023 highlights the importance placed on maintaining financial transparency and accountability. Audit fees are influenced by various factors, including company size, industry, corporate risk, profitability, and audit duration. Access Holding Company's substantial payment to PwC emphasizes their dedication to upholding high auditing standards. By prioritizing transparency, investing in risk management, and evaluating audit costs, banks can ensure the effectiveness of their financial audits while optimizing resources. Ultimately, these practices contribute to the stability and growth of the banking sector as a whole.

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