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Audit Quality and Earnings Management of Listed Non-Financial Firms in Nigeria: The Moderating Role of Board Gender Diversity

Akpandem, Helina ImeEno G. Ukpong PhD Emmanuel Okon Emenji PhD, and Uwem E. Uwah PhD

Abstract

The global financial scandal poses great challenge to the credibility and value relevance of the audit function. The consequence of poor external audit in most cases manifest in financial scandals and failure of companies. The main objective of this study was to examine the effect of audit quality on earnings management of listed non-financial firms in Nigeria. The independent variable being audit quality was proxied by audit fees, audit firm size and audit firm tenure while the dependent variable being earnings management was proxied by Modified Jones discretionary accruals. The moderating variable was Board gender diversity. The research design adopted in this study was ex post facto, secondary data were used and the population of study was 100 listed industrial goods companies in Nigeria and 64 were purposively selected as the sample size. The data were analyzed using pooled ordinary least square regression and the statistical package employed was STATA 17. The result of the analysis revealed that Audit fees (coeff = -0.110[0.032]) have a significant negative effect; audit firm size (coeff. = -0.105 [0.022]) has a significant negative effect; audit tenure (coeff. = -0.000 [0.889]) has no significant effect; a ) However, its interaction with audit tenure, audit committee meeting frequency, and auditor’s opinion type was not significant. It was thus concluded that audit quality plays significant role in checkmating earnings management practices with board diversity strengthening this relationship. Based on these findings, it was recommended amongst others that the management of non-financial firms should engage reputable audit firms and be willing to pay adequate audit fees to ensure high-quality audits, preferably those with strong reputational standing such as the Big Four, since their broader expertise and resources contribute to more effective financial reporting oversight. Key Words: Audit Quality, Earnings management, Audit Committee, Audit Firm Tenure

Keywords

Audit QualityEarnings managementAudit CommitteeAudit Firm Tenure

References

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