Moderating Effect of Audit Quality on The Sustainability of Listed Oil and Gas Companies in Nigeria

Abstract

This study investigates the moderating effect of audit quality on the relationship between sustainability practices and the performance of listed oil and gas companies in Nigeria over the period 2014–2024. Sustainability practices, measured through environmental, social, and governance disclosures, have become increasingly important in enhancing corporate legitimacy and long-term value creation. However, the credibility and impact of these practices may be influenced by the quality of external audits. The study adopts an ex post facto research design and utilizes secondary data obtained from annual reports of selected oil and gas firms listed on the Nigerian Exchange Group. Panel regression analysis was conducted using both fixed and random effects models to test the direct and interaction effects of sustainability and audit quality on firm performance, measured by return on assets (ROA). The findings reveal that sustainability practices have a significant impact on firm performance. Additionally, audit quality—proxied by auditor type (Big 4), tenure, and independence—positively affects firm performance. Most importantly, audit quality significantly moderates the relationship between sustainability practices and firm performance, indicating that high-quality audits enhance the effectiveness and credibility of sustainability disclosures. The study concludes that audit quality serves as a crucial governance mechanism in strengthening the sustainability-performance linkage. It recommends that oil and gas firms should intensify their ESG efforts and engage reputable auditors to enhance stakeholder confidence and financial outcomes. The study contributes to the literature by providing empirical evidence on the role of audit quality in sustainability assurance within the Nigerian context and offers practical insights for regulators, policymakers, and corporate stakeholders.