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

Abstract

This study investigated the moderating impact of audit committee on the relationship between audit quality and earnings management. Earnings management is the dependent variable, audit quality is the independent variable proxy by audit independence, audit fee, audit tenure and audit size while the moderator is audit committee proxy by audit committee governance score. Secondary source Panel data was extracted for a period of ten (10) years from a population of 113 listed non-financial services firms and a sample of 76 companies were selected based on the model adopted to measure the dependent variable. The research engaged a historical causal design to answer the research question raised. The data was analysed using the multiple linear regression technique and the results reveals that audit committee moderates the relationship between audit quality and real earnings management. Conclusively, audit independence has positive insignificant effect on real earnings management, audit fee and audit size have a positive and significant impact on real earnings management, audit tenure has a negative and significant impact on real earnings management, while audit committee has a significant moderating impact on audit quality and real earnings management. The study recommends amongst others that the number of financial experts in the audit committee should be increased to three and that the companies should be encouraged by the relevant regulatory authority to engage Big4 auditors as their external auditors for a transparent and credible financial statement. The study is limited to only quoted non-financial services firms in Nigeria.