AUDIT QUALITY AND EARNINGS MANAGEMENT IN SELECTED QUOTED COMMERCIAL BANKS IN NIGERIA.

admin/ October 3, 2019/ Journal of Business and Social science/ 0 comments

AUDIT QUALITY AND EARNINGS MANAGEMENT IN SELECTED QUOTED COMMERCIAL BANKS IN NIGERIA.

1 OLORUNDARE Oluwatimileyi,  2OMOROGBE, Comfort .E. & 3UCHEHARA, Chris-Chigo

1,2&3 Department of Accounting &Finance, Crawford University, Igbesa, Ogun- State

Corresponding email: omorogbece@yahoo.com

 

Abstract

Earnings management has become a great concern to all users of financial statements especially accountants as it robs off the integrity deserved of the profession. This study examined the effect of audit quality on earnings management of quoted commercial banks in Nigeria. To achieve this objective, four quoted commercial banks that had consistently published their audited annual financial reports between the years 2011-2018 were accessed. The data gathered was analyzed using multiple regressions. The result of the multiple regression analysis revealed R2 = 0.46, (P ≤ 0.01) which implied that audit quality (proxy by audit firm size, auditor industry specialization, audit committee financial expertise and audit tenure) explained 46% variation in earnings management (proxy by discretionary accruals)  of  selected quoted commercial banks in Nigeria. The β coefficient for the variants in the regression line revealed that Audit firm size effect is not significant in the earnings management model. The conclusion of the findings of this study is that, audit firm size does not actually matter in earnings management but instead the experience and expertise of the auditors. Hence, there might be no need paying undue attention on that factor during auditor selection exercise. The study thus recommended that Auditor tenure of at least three years would enable the auditor acquire accurate experience about the goings-on in a firm to enable possibly more accurate detection of controversial financial reporting practices in the firm.

KEYWORDS: Earnings-Management, Discretionary-Accruals, Size, Tenure, Expertise

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