This study examines the relationship between audit firm characteristics and litigation risk among quoted deposit money banks (DMBs) in Nigeria. Guided by agency theory and reputation capital theory, the study uses a positivist philosophy, deductive approach and ex post facto design. A census of 13 quoted DMBs on the Nigerian Exchange Group (NGX) was conducted using secondary data from annual reports for 2015-2024. Litigation risk was measured with an unweighted disclosure-based index, while audit fees, audit tenure, audit firm size and audit firm specialization were the principal explanatory variables. Audit firm age and audit committee independence were included as controls. Panel diagnostics included unit-root, VIF, Hausman and residual cross-section dependence tests, followed by fixed-effects estimation. The results indicate that audit fees have a positive and significant relationship with litigation risk, whereas audit tenure, audit firm specialization and audit firm age have significant inverse relationships. Audit firm size and audit committee independence are not statistically significant. The findings suggest that experience and banking-specific expertise are more closely associated with lower disclosed litigation exposure than audit firm size alone, while higher audit fees appear to signal greater underlying client risk. The study recommends attention to risk-based audit pricing, appropriate auditor tenure within regulatory requirements, industry specialization and continued development of audit-firm experience.
Keywords: Audit quality; audit fees; audit tenure; industry specialization; litigation risk; Nigerian banks