EFFECTS OF AUDIT QUALITY ON EARNINGS MANAGEMENT OF LISTED OIL MARKETING COMPANIES IN NIGERIA 

EFFECTS OF AUDIT QUALITY ON EARNINGS MANAGEMENT OF LISTED OIL MARKETING COMPANIES IN NIGERIA 

ABSTRACT
This study examined the effect of audit quality proxied by audit firm size, auditor industry
specialization, auditor tenure, client importance and audit committee financial expertise on
earnings management represented by discretionary accruals of listed oil marketing companies in
Nigeria. The study also examined the effect of the interaction between audit committee financial
expertise and auditor industry specialization on earnings management of sampled firms. To
achieve these objectives, the study used nine listed oil marketing companies that had consistently
published their audited annual financial reports from 2009 to 2014, and analyzed the data using
multiple regression technique. The dataset was first analyzed using pooled-OLS regression
technique. However, in view of the panel nature of the dataset, it was further analyzed using
fixed and random effects regression models while Hausman specification test was conducted to
choose the preferred result among the two regression results. Result of the Hausman
specification test suggests that the fixed effect regression model is most appropriate for the
dataset. The result of the fixed effect regression analysis revealed that audit firm size, auditor
industry specialization, client importance and audit committee financial expertise are positively
associated with earnings management at less than 5% significance level respectively. In contrast,
auditor tenure and the interaction between audit committee financial expertise and auditor
industry specialization were negative and significantly associated with earnings management of
firms at less than 5% significance level respectively. Overall, the study concluded that audit
quality attributes of audit firm size, auditor industry specialization, auditor tenure, client
importance, audit committee financial expertise and the interaction between audit committee
financial expertise and auditor industry specialization had significant effect on earnings
management of listed oil marketing companies in Nigeria. In view of the results, the study
recommended among others auditor tenure of three years and above in order to check earnings
management of firms in Nigeria. Also, auditor industry specialization should be encouraged by
regulators such as SEC as the interaction between audit committee financial expertise and
auditor industry specialization mitigates earnings management of firms in Nigeria. In addition,
regulatory agencies such as SEC should make a policy that compels companies to disclose both
audit and non-audit fees in their audited annual financial reports to enable users determine the
level of audit client importance and the reliance to place on the auditor‟s report.

TABLE OF CONTENT

Title page- – – – – – – – – i
Approval page – – – – – – – -ii
Dedication – – – – – – – – -iii
Acknowledgement – – – – – – – -iv
Abstract – – – – – – – – – -v
Table of content – – – – – – – -vi

CHAPTER ONE
INTRODUCTION – – – – – – – -1
1.0 Background of the study – – – – -1
1.1 Statement of the problem – – – – -5
1.2 Purpose of the study – – – – – -6
1.3 Significance of the study – – – – -8
1.4 Research questions – – – – – -9
1.5 Scope of the study – – – – – – -10

CHAPTER TWO

LITERATURE REVIEW – – – – – – -11

CHAPTER THREE

Research methodology – – – – – – -39
Design of study – – – – – – – -40

CHAPTER FOUR

Presentation, analysis and interpretation of data – -48

CHAPTER FIVE

Summary of findings – – – – – – -60
Conclusion – – – – – – – – -61
Recommendations – – – – – – – -62
Suggestions for further research – – – – -64
References – – – – – – – – -65
Appendix I – – – – — – – – -68
Questionnaire. – – – – – – – -69

EFFECTS OF AUDIT QUALITY ON EARNINGS MANAGEMENT OF LISTED OIL MARKETING COMPANIES IN NIGERIA 

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