Audit Quality and Earnings Management of Listed Industrial Goods Firms in Nigeria
DOI:
https://doi.org/10.61143/umyu-jafr.3(1)2022.010Keywords:
Audit quality, Earnings management, Audit firm size, Auditor tenure, Client importanceAbstract
This paper investigated the effect of audit quality on earnings management of listed industrial goods firms in Nigeria. The study used a correlational research approach, with secondary data gathered from eight (8) selected Nigerian industrial goods manufacturers for ten years (2010-2019). Stata version 11 was used to do multiple regression analysis on the data. The study discovered that audit firm size and earnings management of listed industrial goods firms (IGFs) in Nigeria are not significantly associated; auditor sector specialization has not significantly associated with earnings management of Nigeria's listed IGFs; auditor tenure has significantly affected earnings management of listed IGFs, and auditor client importance has significantly affected earnings management of listed IGFs in Nigeria. Based on the findings, it was recommended that the size of audit firms should not be the basis for hiring services of audit firms; there should be strict adherence to the recommendation by the Securities and Exchange Commission (SEC) that no company should retain an audit firm for a period longer than ten years consecutively. Since audit fees affect client importance, regulatory bodies such as the SEC and Financial Reporting Council of Nigeria (FRCN) should make the disclosure of all audit fees a mandatory requirement for all listed industrial goods firms in Nigeria.
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