Audit Firm Attributes and Real Earnings Management: Evidence from Quoted Nigerian Service Firms
Main Article Content
Udofia Maria Etim
Ebiaghan Frank Orits*
This study investigated the relationship between audit firm attributes and real earnings management among listed service firms in Nigeria, covering a ten-year period from 2014 to 2023. Drawing on the auditor theory of inspired confidence, secondary data were collected from the annual reports and accounts of quoted companies on the Nigerian exchange group and analysed via STATA 13 statistical package. The findings revealed no significant relationship between any of these audit firm attributes and real earnings management, indicating that these factors do not have a measurable influence on managerial decisions to manipulate earnings through operational activities among the sampled Nigerian service firms.it is therefore recommended that Regulatory bodies should prioritize strengthening audit regulations and enforcement mechanisms, as relying solely on larger audit firms may not effectively curb real earnings management in Nigerian service firms.
Ajekwe, C. M., & Ibiamke, A. (2017). The association between audit quality and earnings management by listed firms in Nigeria. European Journal of Accounting, Auditing and Finance Research, 5(4), 1–11.
Al-Qadasi, A. A., Baatwah, S. R., Ghaleb, B. A., & Qasem, A. (2023). Do Industry Specialist Audit Firms Influence Real Earnings Management? The Role of Auditor Independence. Revista de Contabilidad-Spanish Accounting Review, 26(2). https://doi.org/10.6018/RCSAR.480421
Bassiouny, S. W., Soliman, M. M., & Ragab, A. (2016). The impact of firm characteristics on earnings management: an empirical study on the listed firms in Egypt. The Business and Management Review, 7(2).
Charles, P., & Maccarthy, M. I. T. (2023). Audit Quality and Earnings Management of Listed International Licensed Commercial Banks in Nigeria. The Journal of Accounting and Management Research, 8(1).
Ching, C. P., Teh, B. H., San, O. T., & Hoe, H. Y. (2015). The Relationship among Audit Quality, Earnings Management, and Financial Performance of Malaysian Public Listed Companies. International Journal of Economics & Management, 9(1).
Davidson, R. A., & Neu, D. (1993). A note on the association between audit firm size and audit quality. Contemporary Accounting Research, 9(2), 479–488.
DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183–199.
Dopuch, N., & Simunic, D. (1982). Competition in auditing: An assessment. Fourth Symposium on Auditing Research, 401, 405.
Dye, R. A. (1993). Auditing standards, legal liability, and auditor wealth. Journal of Political Economy, 101(5), 887–914.
Eriabie, S., & Leslie, E. (2017). Audit quality and Earnings Management in Quoted Nigerian Banks. In Journal of Accounting, Finance and Auditing Studies (Vol. 3, Issue 1).
Francis, J. R. (2004). What do we know about audit quality? The British Accounting Review, 36(4), 345–368.
Francis, J. R., & Yu, M. D. (2009). Big 4 office size and audit quality. The Accounting Review, 84(5), 1521–1552.
Ghosh, A., & Moon, D. (2005). Auditor tenure and perceptions of audit quality. The Accounting Review, 80(2), 585–612.
Guo, Q., Koch, C., & Zhu, A. (2022). The Value of Auditor Industry Specialization: Evidence from a Structural Model. Accounting Review, 97(7). https://doi.org/10.2308/TAR-2020-0525
Hay, D., Knechel, W. R., & Wong, N. (2004). Audit Fees: A Meta-Analysis of the Effect of Supply and Demand Attributes. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.512642
Hohenfels, D. (2016). Auditor Tenure and Perceived Earnings Quality. International Journal of Auditing, 20(3). https://doi.org/10.1111/ijau.12069
Indah, S. N., & Pamudji, S. (2010). Pengaruh kompetensi dan independensi auditor terhadap kualitas audit (studi empiris pada auditor kap di Semarang). Universitas Diponegoro.
Jensen, M. C., & Meckling, W. (1976). Theory of the Firm: Managerial Behavior, Agency Cost and Ownership Structure. Journal of Financial Economics, 3(4), 305–360.
Jeroh, E., & Ozegbe, K. K. (2022). Audit quality and the financial performance of quoted companies in Nigeria: Empirical discourse. Acta Universitatis Danubius. Œconomica, 18(5).
Johnson, V. E., Khurana, I. K., & Reynolds, J. K. (2002). Audit‐firm tenure and the quality of financial reports. Contemporary Accounting Research, 19(4), 637–660.
Kharuddin, K. A. M., Basioudis, I. G., & Hay, D. (2019). Partner industry specialization and audit pricing in the United Kingdom. Journal of International Accounting, Auditing and Taxation, 35, 57–70. https://doi.org/10.1016/j.intaccaudtax.2019.05.005
Le, B., & Moore, P. H. (2023). The impact of audit quality on earnings management and cost of equity capital: evidence from a developing market. Journal of Financial Reporting and Accounting, 21(3). https://doi.org/10.1108/JFRA-09-2021-0284
Lei, D., Zho, Y., & Wang, Y. (2020). Auditor-client disagreements, auditor resignations, and audit fees charged by successor auditors. Journal of Applied Business Research, 36(1). https://doi.org/10.19030/jabr.v36i1.10321
Lin, J. W., & Hwang, M. I. (2010). Audit quality, corporate governance, and earnings management: A meta‐analysis. International Journal of Auditing, 14(1), 57–77.
Micah, E. E. M., Ibitomi, T., & Ibrahim, S. (2022). Audit Quality and Earnings Manipulations in Nigeria: Beneish Model. European Journal of Accounting, Auditing and Finance Research, 10(6). https://doi.org/10.37745/ejaafr.2013/vol10n6pp5673
Moore, G., & Scott, W. R. (1989). Auditors’ legal liability, collusion with management, and investors’ loss. Contemporary Accounting Research, 5(2), 754–774.
Musa, W. A., Salman, R. T., & Amoo, I. O. (2021). Determinants of audit fees in quoted financial and non-financial firms. Corporate Law and Governance Review, 3(2). https://doi.org/10.22495/clgrv3i2p3
Nnko, K. (2022). The Effectiveness of Strategies Used to Combat Earnings Management in Commercial Banks in Tanzania. The International Journal of Business & Management, 10(6).
Okpara, E., Okotume, E. N., & Odubuasi, A. C. (2023). Impact of audit quality on earnings management of money deposit banks in Nigeria. Journal of Accounting, Business and Social Sciences, 7(1), 25–40.
Oludayo, A. E. (2024). Effect of Audit Quality on Earnings Management Practices of Quoted Conglomerate Companies in Nigeria. Department of Management and Accounting, Faculty of Administration, Obafemi Awolowo University.
Roychowdhury, S. (2006). Earnings management through real activities manipulation. Sloan School of Management, Massachusetts Institute of Technology.
Sangkala, M. (2024). Concept and Application of Audit in Information Systems. Marginal: Journal of Management Accounting, General Finance, and International Economic Issues, 3(3), 770–781. https://doi.org/10.55047/marginal.v3i3.1193
Sun, J., & Liu, G. (2013). Auditor industry specialization, board governance, and earnings management. Managerial Auditing Journal, 28(1). https://doi.org/10.1108/02686901311282498
Tran, T. T. G., Nguyen, T. T., Pham, B. T. N., & Tran, P. T. T. (2023). Audit partner tenure and earnings management: evidence from Vietnam. Journal of Financial Reporting and Accounting. https://doi.org/10.1108/JFRA-07-2022-0258
Verma, D., Dawar, V., & Chaudhary, P. (2024). Do audit attributes impact earnings quality? Evidence from India. Asian Journal of Accounting Research, 9(1). https://doi.org/10.1108/AJAR-12-2022-0428
Vu, D. H. T. (2012). Determinants of audit fees for Swedish listed non-financial firms in NASDAQ OMX Stockholm.
Wahab, Y. A. A. K., Velashani, M. A. B., & Salehi, M. (2023). A comparative study of the relationship between audit quality and earnings management in the markets of Iraq and Oman. Journal of Infrastructure, Policy and Development, 7(3), 2813.
Yuan, R., Cheng, Y., & Ye, K. (2016). Auditor Industry Specialization and Discretionary Accruals: The Role of Client Strategy. International Journal of Accounting, 51(2). https://doi.org/10.1016/j.intacc.2016.04.003
