Pyrex Journal of Taxation and Accounting Management

July 2017 Vol. 1(1), pp. 1-8

Copyright © 2017 Pyrex Journals

Full Length Research Paper

Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks

Olabisi Jayeola*, Agbatogun Taofeek O and Akinrinlola Toluwalase O

Department of Accounting, College of Management Sciences, Federal University of Agriculture, Abeokuta, Nigeria.

Corresponding Author E-mail:

Accepted 3rd July, 2017


The incessant failure of Nigerian deposit money banks has raised queries on audit quality in the Nigerian banking sector. Hence, the study examined relationship between Audit Quality and Earnings Management in Nigerian listed deposit money banks. The study adopted a longitudinal research design and secondary data covering a period of 2005-2014 were collected. The population of the study comprised fifteen (15) deposit money banks listed on Nigerian Stock Exchange as at 2016, out of which six (6) banks were randomly selected resulting in 60 observations. Panel data technique was employed, while fixed and random effects model were used for estimation. Descriptive Statistics, Pearson correlation coefficient and simple pooled OLS regression analysis were used for analysis to determine possible link between the variables identified. The results of the study showed that a significant positive relationship existed between joint audit and earnings management (ß1= 1.054533; t=2.34; and p=0.0023<0.05), which implies that a change to joint audit from single audit increases earnings management. Also, a significant negative relationship existed between audit specialization and earnings management (ß2= -0.0302366; t= -2.07; and p=0.043<0.05), which implies that every unit increase in audit specialization decreases earnings management. Furthermore, a significant positive relationship existed between audit independence and earnings management (ß4 = is 0.6010025; t = 4.96; p-value at 0.008<0.05). However, there was an insignificant negative relationship between audit tenure and earnings management (ß2 = -0.0078915; t= -0.12; p=0.906>0.05). The study concluded that lengthy audit tenures were mechanisms adopted by banks’ managers to influence auditors’ objectivity in the course of audit assignment. Therefore, the study recommended that lengthy audit tenure be discouraged.

Keywords: Joint Audit, Audit Specialization, Audit Independence, Audit Tenure and Audit Quality.

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