The Impact of External Audit on Earnings Restatement of Quoted Manufacturing Firms in the Global South Using Nigeria as a Case Study

Abstract

The study seeks to investigate the impact of external audit on earnings restatement of quoted manufacturing firm in the global south, using Nigeria as a case study. In the face of growing literature and public anxiety about the concern that audit opinion is fast losing credibility and relevance, the necessity to shed light on external audit quality on earnings restatement of quoted manufacturing firm cannot be overemphasized. Literature review and empirical evidence has shown that low share value of many manufacturing firms have been attributed to many African nations, which recorded a low contribution to economy growth with only few manufacturing firms showing a significant relationship. The issue is whether these corporate collapses are not from the outcome of poor audit quality and the inability of the audit function to curtail the practice of financial misrepresentation. Using numbers, management may abuse "big bath" restructuring charges, premature revenue recognition, reserves, and write-offs of purchased in-process research and development. The contribution of the study will be helpful in evaluating effect of external audit and earnings reinstatement to the manufacturing companies and supporting improvement of their ways in other to increase productivity, profitability, and investment. Quasi-experimental research design adopted for this study. The Pearson's product moment correlation coefficient (PPMC) statistical tool, SPSS used to test the hypotheses formulated in this study. Results indicated that there is significant relationship between external audit and earnings restatement. There is significant relationship between external audit and discretionary accruals. Hence, the study concluded that external audit is a fundamental means of checking and scrutinizing financial statements to prevent the provision of false economic events and activities of business that would cause accounting scandals. The study recommended that the management of manufacturing companies should employ external auditors to independently check their books and records and prevent falsified accounting reports that could lead to accounting scandals.