Audit Quality and Creative Accounting Strategy: Evidence from Nigerian Public Listed Companies

Abstract

Keywords: Audit Quality, Creative Accounting strategy, Firms, Report, Independence. The purpose of this study is to provide an empirical evidence on the relationship between audit quality and creative accounting strategy evidence from Nigerian Public Listed companies. Using a panel data set of all companies listed on the Nigerian Stock Exchange (NSE) for the period of nine years from 2010-2018. This paper employs 84 companies listed on the board of NSE with 756 firm-year observations. The study used secondary method to retrieve data from the annual reports of the listed companies and Thompson Reuters DataStream. The study employs multiple regression to examine the relationship between audit quality and creative accounting strategy. The results of the study displayed an insignificant negative relationship between audit fee and creative accounting strategy. This shows that changes in audit fee is not in anywhere associated with creative accounting strategy. Audit size is found to be insignificant and positive relationship with creative accounting strategy. This implies that audit size may not limit managers opportunistic behavior toward engaging in creative accounting strategy. However, a significant positive relationship was found between audit independence and creative accounting strategy. This implies that the more independence an audit firm enjoys, the more creative accounting strategy engaged by managers. Finally, our findings suggest that regulators of the Nigeria capital market should reform the audit market so as to ensure that audit firms would carry out the audit assignment in such a way to mitigate and prevent managers on engaging in fraudulent creative accounting strategy.

Keywords

• audit quality
• creative accounting strategy
• firms
• report
• independence
• nigeria