Effect of Audit Quality on Earnings Management of Listed Industrial Goods Companies in Nigeria

Abstract

This study examined the effect of audit quality on earnings management among listed industrial goods companies in Nigeria. The study was motivated by persistent concerns about financial reporting credibility, audit governance effectiveness, and managerial opportunistic behaviour in emerging capital markets. The study adopted an ex-post facto research design because secondary historical data were utilized without manipulating study variables. The population of the study comprised 21 listed industrial goods companies listed on the Nigerian Exchange Group (NXG). Census sampling was employed due to the small population size. Data were collected from audited annual financial statements covering the period 2015 to 2024. Panel regression analysis was used for data estimation after conducting diagnostic tests such as multicollinearity, heteroskedasticity, and Hausman specification tests. The results revealed that auditor industry specialization, auditor independence, and audit tenure significantly reduce earnings management behaviour. Audit fee was not statistically significant, while audit size showed mixed influence on earnings management. The study concludes that audit quality attributes play important roles in improving financial reporting quality among consumer goods firms in Nigeria. The study recommends stronger audit independence enforcement, promotion of auditor specialization, and optimal audit tenure regulation to enhance transparency and accountability.