Document Type : Original Research

Authors

Department of Accounting, Benue State University, Makurdi, Nigeria

Abstract

The primary focus of this study was to determine the effect of audit client importance on earnings management of Nigerian quoted consumer goods firms. The descriptive research design approach was adopted. From 2012 to 2019, data were obtained from 13 consumer goods firms quoted on the Nigerian Exchange Group. The discretionary accrual approach was used to evaluate earnings management. Descriptive statistics and random effects regression were the main techniques used to analyse the study’s data. The findings indicated that audit client importance (β=-0.1872) has a negative and significant effect on the earnings management of Nigerian quoted consumer goods firms. The study concluded that earnings management practices of Nigerian quoted consumer goods firms are curtailed when the firms are of important clients to their auditors. The recommendation was that management of firms should enhance approaches that will improve their performance in terms of sales to remain important clients to their auditors.

Keywords

Main Subjects

COPYRIGHTS

©2022 The author(s). This is an open access article distributed under the terms of the Creative Commons Attribution (CC BY 4.0), which permits unrestricted use, distribution, and reproduction in any medium, as long as the original authors and source are cited. No permission is required from the authors or the publishers.

Akers, M., Giacomino, D., & Bellovary, J. (2007). Earnings Management and its Implications. The Certified Public Accountants Journal, 79(8), 64-68.
Ali, B., & Kamardin, H. (2018). Audit Committee Characteristics and Real Earnings Management: A Review of Existing Literature and the New Avenue of Research. Asian Journal of Multidisciplinary Studies, 6(12), 129-135.
Aliyu, M., Musa, A., & Zachariah, P. (2015). Impact of Audit Quality on Earnings Management of Listed Deposit Money Banks in Nigeria. Journal of Accounting and Financial Management, 1(8), 31-46.
Al-Mousawi, R., & Al-Thuneibat, A. (2011). The Effect of Audit Quality on the Earnings Management Activities. Dirasat Administrative Sciences, 38(2), 614-628.
Bergstresser, D., & Philippon, T. (2006). CEO Incentives and Earnings Management. Journal of Financial Economics, 80, 511–529.
Brammer, S., & Millington, A. (2008). Does it pay to be different? An Analysis of the Relationship between Corporate Social and Financial Performance. Strategic Management Journal, 29, 1325-1343.
CBN. (2020). Statistical Bulletin Real Sector Final. Abuja: Central Bank of Nigeria.
Cheng, H., & Warfield, S. (2010). Client Importance, Non-audit Services, and Abnormal accruals. The Accounting Review, 78(4), 931-955.
Ching, C., Teh, B., San, O., & Hoe, H. (2015). The Relationship among Audit Quality, Earnings Management, and Financial Performance of Malaysian Public Listed Firms. International Journal of Economics and Management, 9(1), 211-229.
Dechow, P., Sloan, R., & Sweeney, A. (1995). Detecting Earnings Management. The Accounting Review, 70(20), 193-225.
Ghosh, A., Marra, A., & Moon, D. (2010). Corporate Boards, Audit Committees, and Earnings Management: Pre - and Post – SOX Evidence. Journal of Business Finance and Accounting, 7((9-10)), 1145 – 1176.
Jensen, M., & Meckling, W. (1976). Theory of the Firm: Managerial Behaviour, Agency Costs. and Ownership Structure. Journal of Financial Economics, 3(4), 305-360.
Li, C. (2010). Does Client Importance Affect Auditor Independence at the Office Level? Empirical Evidence from Going Concern Opinions. Contemporary Accounting Research, 26(1), 201-230.
Mallin, C. (2007). Corporate Governance (2nd ed.). New York: Oxford University Press.
Okolie, A. (2014). Audit Firm Size And Cash – Based Earnings Management of Quoted Firms in Nigeria. European Journal of Accounting Auditing and Finance Research, 2(5), 48-75.
Omidfar, M., Golestani, H., Einafshar, H., & Taheri, M. (2013). Investigating the relationship between client importance and audit quality: Evidence from TSE. European Online Journal of Natural and Social Sciences, 2(3), 2177-2183.
Sharma, V., Sharma, D., & Ananthanarayanan, U. (2011). Client Importance and Earnings Management: The Moderating Role of Audit Committees. Auditing: A Journal of Practice & Theory, 30(3), 125-156.
Susanto, A., & Herusetya, A. (2014). The Impact of Client Importance on Earnings Management and Going-Concern Opinion: Empirical Evidence from Indonesia. JAAI, 8(1), 75-88.
Tyokoso, G. (2017). Effects of Audit Quality on Earnings Management of Listed Oil Marketing Firms in Nigeria. Zaria: Unpublished Ph.D. Thesis, Ahmadu Bello University.