IMPACT OF AUDIT QUALITY ON EARNINGS MANAGEMENT OF LISTED DEPOSIT MONEY BANKS

Abstract

The study examined the impact of audit quality on earnings management of listed deposit money banks in Nigeria for the period of 2012-2019 The study adopted correlational research design. The study used data extracted from annual reports of listed deposit money banks in Nigeria. The study was anchored on the agency theory to establish conceptual relationship between the variables. The population of the study comprised of the 14listed deposit money banks. The adjusted population was 12 listed deposit money banks in Nigeria. The data collected were analyzed with the aid of paneled regression. The findings revealed that there is positive and significant relationship between audit industry specialization and earnings management of listed deposit money banks. However, audit tenure has negative and significant relationship with earnings management of listed deposit money banks. Based on the findings, the study recommends that regulatory authorities in Nigeria such as SEC should come out with a policy that encourages audit firms in Nigeria to create departments within their firms that specialize along industry lines of companies listed on the Nigerian Stock Exchange (NSE)and that auditor tenure of three years and above for external auditors of public companies in Nigeria. This reinforces SEC (2014) code of corporate governance which states that Nigerian public companies can retain external auditors for a period of ten years consecutively, while disengaged auditors can only be reappointed after a period of seven years.

Keywords

• Earnings management
• Audit firm size
• Audit industry Specialization
• Audit tenure