AUDIT QUALITY, GOVERNANCE MECHANISMS AND EARNINGS MANAGEMENT OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA

Authors

  • Adamu Magaji Federal University Gusau
  • Monday Samuel Okolo Tropical General Investment group of Companies, Apapa, Lagos State
  • Lawal Ibrahim Federal University Gusau

DOI:

https://doi.org/10.57233/gujaf.v1i1.14

Keywords:

Audit quality, Governance mechanisms, , Earnings management, Deposit money banks

Abstract

Corporate failures across the globe have become an issue of concern for stakeholders and
regulators. Financial reporting scandals that occurred in oceanic bank, intercontinental bank and
the recent bank crises of Skye Bank in 2016 really motivated the need for this study. The study
examines audit quality, governance mechanism and earnings management of listed deposit money
banks in Nigeria for the period of eleven years from 2009-2019. The population of the study consists
of all the 14 listed deposit money banks in Nigeria as at 31st December, 2019. The study adopted
expo-factor and correlation research designs, and multiple regression was employed as technique
of data analysis. The findings of the study revealed that audit independence, managerial ownership
and board independent have significant negative impact on earnings management of quoted
Nigerian banks while auditor size and audit tenure have insignificant influence on earnings
management of listed deposit money banks in Nigeria. In line with the findings, the study therefore
concluded that audit independence, managerial ownership and board independence have
significant negative impact on earnings management of banks in Nigeria while audit firm size and
audit tenure have no significant impact on earnings management of listed deposit money banks in
Nigeria. It is therefore recommended that Nigeria listed deposit money banks should maintain the
audit fees they are paying to the audit firm or increase it as any attempt to reduce the audit fees can
increase earnings management. However managerial shareholding should be increase as it will
reduce earnings management and also board independent directors on the board should be
increased from minimum of two as it will reduce earnings management of listed deposit money
banks in Nigeria on the other hand there is no significant impact between audit firm tenure and
audit firm size on earnings management of listed deposit money banks in Nigeria. For audit firm
size the study recommended that local audit firms should be used instead of the Big 4 as the size have no effect on earnings management. Also the study recommended that for audit tenure the bank
should maintain its audit tenure as it does not have any influence on earnings management. 

Author Biographies

Adamu Magaji, Federal University Gusau

Department of Accounting & Finance,
Federal University Gusau, Zamfara State

Monday Samuel Okolo, Tropical General Investment group of Companies, Apapa, Lagos State

Control Assurance and Risk Management
Tropical General Investment group of Companies, Apapa, Lagos State

Lawal Ibrahim, Federal University Gusau

Bursary Department, Finance
Federal University Gusau, Zamfara State Nigeria

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Published

2020-04-20

How to Cite

Magaji, A., Okolo, M. S., & Ibrahim, L. (2020). AUDIT QUALITY, GOVERNANCE MECHANISMS AND EARNINGS MANAGEMENT OF QUOTED DEPOSIT MONEY BANKS IN NIGERIA. Gusau Journal of Accounting and Finance, 1(1), 26. https://doi.org/10.57233/gujaf.v1i1.14