MODERATING EFFECT OF AUDIT COMMITTEE EFFECTIVENESS ON THE RELATIONSHIP BETWEEN AUDIT QUALITY AND REAL EARNINGS MANAGEMENT OF NON-FINANCIAL FIRMS IN NIGERIA

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Published Jun 30, 2022
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Vol. 6 No. 1 (2022): June 2022

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John Dollay ADIGIZEY
Department of Business Administration, Nasarawa State University, Keffi, Nigeria

Abstract

Expectation for improvement in audit quality of firms has been on a rising trend in view of frequent cases of corporate scandals originating from managers' activities, viz-á-viz, the earnings management practices. This study examined the moderating effect of audit committee effectiveness on the relationship between audit quality and real earnings management of listed non-financial firms in Nigeria. Longitudinal research design was adopted with a study population of 116 non-financial companies quoted on the Nigeria Exchange Group (NGX), from which a sample of 50 firms was selected and data extracted from their audited annual reports for the period 2011-2020. Using EViews 9, the study employed multiple regression technique to analyze the data. Results showed that audit-committee-effectiveness had a significant moderating effect on the relationship between audit-firm-size, auditor-tenure and auditor-industry-specialization, and real earnings-management, but had no significant moderating effect on the relationship between audit-fees and real earnings-management. It was thus concluded that audit-committee-effectiveness facilitated monitoring activities over the auditor to ensure greater financial reporting quality. The study, therefore, recommended the need for companies, stakeholders, finance/accounting regulators, to consider an expanded approach in constraining real earnings management by ensuring that audit committee members have financial expertise to enhance their effectiveness.

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