Auditors' Report And Investor Confidence In The Nigerian Capital Market :

This study examines at the relationship between auditor’s report and investor confidence in the Nigerian Capital Market. The study was promoted by the spate of corporate scandals around the globe particularly the recent Cadbury case that led to loss of investments by shareholders, having in mind the role played by the auditors of the affected companies. The objective of the study is to find out whether or not auditor’s report has significant relationship with investor confidence in our capital market. The period covered by the study is eight years (2000-2007). The population of the study consists of 135 companies (excluding banks and insurance companies due to the model adopted), whose shares are quoted on the first tier of the Nigerian Stock Exchange (NSE) on or before January 2000. The companies are grouped into strata, based on the industrial grouping of the NSE, and Stratified random sampling was used to select 34 companies. To test the hypothesis of the study, market capitalization was used as proxy for investor’s confidence, and audit quality index for auditor's report. Stationarity properties of the time series data were first empirically investigated by the Augmented Dickey Fuller (ADF) test which showed that all the variable (market capitalization) is stationary. Ordinary Least Square Regression was used to establish relationship between investor confidence and auditor's report. The study finds that auditor’s report is positively related to investor confidence in the Nigerian Capital Market. In addition, there is variability in the pattern of auditor’s report. The study recommends that the quality of audit needs to be strengthen to consolidate confidence of investors in corporate audit vis-a-viz our capital market. This can be achieved by strict adherence and compliance with set standards and ethics. Erring auditors should be banned from auditing financial statements of companies quoted on the Nigerian Stock Exchange. Regulators (SEC and NSE) should strengthen measures to protect investors thereby improving confidence in the Capital Market.