IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v8y2024i1p1658-1670.html
   My bibliography  Save this article

Impact of Auditor’s Independence on Earnings Management of Listed Deposit Money Banks in Nigeria

Author

Listed:
  • Adewumi Ayodeji Davidson

    (Department of Auditing and Taxation Durban, University of Technology, Durban, South Africa)

  • Fakunle Isaiah Omotayo

    (Department of Accounting, Kings University, Odeomu, Osun State, Nigeria)

  • Bamidele Matthew Mayor

    (Department of Accounting, Osun State College of Technology, Esa-Oke, Osun State, Nigeria)

  • Akomolehin Israel Akinwale

    (Department of Accounting, National Open University of Nigeria)

Abstract

This research investigates the impact of auditor’s independence on earnings management in listed deposit money banks in Nigeria. Utilizing a correlational research design, the study explores the relationships between auditors’ independence, measured by audit firm specialization, audit fee, and audit firm size, and earnings management, proxied by accrued earnings. Secondary data from the annual reports and accounts of twelve selected banks over ten years (2013-2022) were analyzed using fixed effect estimation. The findings reveal that audit fee, audit size, and audit tenure positively influence earnings management. The positive coefficients suggest that higher audit fees, larger audit sizes, and longer audit tenures are associated with increased discretionary accruals. However, non-significant p-values caution against accepting these associations at the 5% level. The coefficient of determination (R2) indicates that the chosen variables collectively explain 27.26% of earnings management, offering some explanatory power to the model. In conclusion, the study recommends listed deposit money banks to prioritize engagement with Big 4 Audit Firms and carefully consider audit fee structures. Regulatory bodies, particularly the Central Bank of Nigeria, are advised to enhance surveillance, particularly in the realm of auditor remunerations. The research underscores the need for caution in interpreting the identified associations and highlights avenues for future research, including incorporating control variables and addressing potential endogeneity concerns for a more nuanced understanding of the relationship.

Suggested Citation

  • Adewumi Ayodeji Davidson & Fakunle Isaiah Omotayo & Bamidele Matthew Mayor & Akomolehin Israel Akinwale, 2024. "Impact of Auditor’s Independence on Earnings Management of Listed Deposit Money Banks in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(1), pages 1658-1670, January.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:1:p:1658-1670
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-8-issue-1/1658-1670.pdf
    Download Restriction: no
    File URL: https://www.rsisinternational.org/journals/ijriss/articles/impact-of-auditors-independence-on-earnings-management-of-listed-deposit-money-banks-in-nigeria/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brian Bratten & Stephannie Larocque & Teri Lombardi Yohn, 2023. "Filling in the GAAPs in Individual Analysts’ Street Earnings Forecasts," Management Science, INFORMS, vol. 69(8), pages 4790-4809, August.
    2. Abdul Rahman Al Natour & Naim Salameh Al-Qadi & Rasmi Meqbel & Hala Zaidan & Hamzah Al-Mawali & Manaf Al-Okaily, 2023. "The Role of Privatisation in Sustaining Auditor Independence: Evidence from the Developing Markets," Sustainability, MDPI, vol. 15(8), pages 1-17, April.
    3. Mouna Hamza & Damak-Ayadi, 2023. "The Perception of Audit Quality Among Financial Statements Users, Preparers and Auditors, In Tunisia," Journal of Accounting and Management Information Systems, Faculty of Accounting and Management Information Systems, The Bucharest University of Economic Studies, vol. 22(2), pages 202-224, June.
    4. Safia Abdo Ali Al-Begali & Lian Kee Phua, 2023. "Accruals, real earnings management, and CEO demographic attributes in emerging markets: Does concentration of family ownership count?," Cogent Business & Management, Taylor & Francis Journals, vol. 10(2), pages 2239979-223, December.
    5. Sarowar Hossain & Jenny Jing Wang, 2023. "Abnormal audit fees and audit quality: Australian evidence," Australian Journal of Management, Australian School of Business, vol. 48(3), pages 596-624, August.
    6. Jeff Zeyun Chen & Anastasios Elemes & Gerald J. Lobo, 2023. "David versus Goliath: The Relation between Auditor Size and Audit Quality for U.K. Private Firms," European Accounting Review, Taylor & Francis Journals, vol. 32(2), pages 447-480, March.
    7. Tatiana Danescu & Ovidiu Spatacean, 2018. "Audit opinion impact in the investors’ perception – empirical evidence on Bucharest Stock Exchange," The Audit Financiar journal, Chamber of Financial Auditors of Romania, vol. 16(149), pages 111-111, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sierra-García, Laura & Gambetta, Nicolás & García-Benau, María A. & Orta-Pérez, Manuel, 2019. "Understanding the determinants of the magnitude of entity-level risk and account-level risk key audit matters: The case of the United Kingdom," The British Accounting Review, Elsevier, vol. 51(3), pages 227-240.
    2. Nicolás Gambetta & Laura Sierra‐García & María Antonia García‐Benau & Josefina Novejarque‐Civera, 2023. "The Informative Value of Key Audit Matters in the Audit Report: Understanding the Impact of the Audit Firm and KAM Type," Australian Accounting Review, CPA Australia, vol. 33(2), pages 114-134, June.
    3. HAŢEGAN Camelia-Daniela, 2020. "Key Audit Matters At The Financial Services Companies: Are There Differences?," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 168-178, December.
    4. Nicolás Gambetta & Laura Sierra García & María Antonia García Benau & Josefina Novejarque Civera, 2022. "The informative value of Key Audit Matters in the audit report," Documentos de Investigación 129, Universidad ORT Uruguay. Facultad de Administración y Ciencias Sociales.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:8:y:2024:i:1:p:1658-1670. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.