Audit Quality-Earnings Management Nexus in Selected Non-Financial Firms in Nigeria
Abstract
Objectives: The study examines the connection between audit quality and earnings management practices in listed non-financial firms in Nigeria.
Prior work: The study extends the discussion on earnings management and audit quality nexus by exploring the concept of real earnings management vis-à-vis the metrics of audit quality.
Approach: A purposive non-probability sampling procedure was employed to choose a sample of 30 quoted companies on the Nigerian Exchange Group (NGX). Data was retrieved from the audited financial reports of the selected companies for ten years (2012-2021), and hypotheses were tested using the random effect regression model.
Results: The results showed that the audit quality metrics used (audit fee, specialization of the auditor, auditor’s tenure, and audit firm size) could not apprise any significant change in the actual earnings management practice of the sampled firms.
Implications: Future researchers should consider different factors and proxies to measure audit quality, which may significantly affect actual earnings management in Nigeria.
Value: The study upsets the preponderant notion of audit quality having a declining effect on earnings management and in uncovering real earnings management, size, the quantum of audit fees paid, length of auditor-client relationship and engagement of industry-specialized auditor offers no robust influence.
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