Effect of audit quality on earnings management of listed deposit money banks in Nigeria

Abstract

High quality audit is the one that is capable of uncovering material errors and misstatements in the financial statements. With the consistent defaults and failures, and unwanted mergers and takeovers in the Nigerian banking sector recently, in spite of unqualified auditors‟ reports for most of the banks involved, questioned the quality of audit in the banking sector. This study examined the impact of audit quality on Earnings Management of listed deposit money banks in Nigeria. The correlational research design is employed in a sample of ten (10) listed deposit money banks for a period of eight (8) years (2006-2013), using secondary data. The study used the Ordinary Least Squares (OLS) regression technique of data analysis; the study found that audit quality has significant impact on the Earnings Management of listed deposit money banks in Nigeria during the period of the study. The study also found that audit firm size and joint audit services have significant negative impact on the Earnings Management of listed deposit money banks in Nigeria. Similarly, the study found that auditor financial dependence has significant positive impact on Earnings Management of listed deposit money banks in Nigeria. The study recommended that listed deposit money banks should emphasize the use of big 4 audit firm and joint audit services. The study also recommends that the Central Bank of Nigeria (CBN) should increase its surveillance in the areas of auditor remunerations