Effect of Auditor Attributes on Real Earnings Management of Quoted Food and Beverages Companies in Nigeria

Abstract

Over the past years, the markets have witnessed several accounting scandals mainly because of the
manipulation of the accounting figures reported in the financial statements. This has led to
questioning the ability of auditors to effectively constrain such practices, especially in developing
countries. Given the prominence of this problem and the expected role of the auditor this study examined the combined effect of auditor tenure and auditor industry specialization on real earnings management among quoted food and beverages companies in Nigeria. Real earnings management as dependent variable was proxied by discretionary accruals. Ex post facto research design was adopted; population included all the 13 companies in the food and beverages sub-sector. The entire 13 companies were used for the purpose of data collection. The study covered the period 2012 to 2018. Secondary data was extracted from the annual accounts of the companies for the period of the study. The study employed the use of multiple regression technique to analyse the data. The result of the study showed that both auditor tenure and auditor industry specialization have negative but significant effect on real earnings management. The study concluded that both variables can be used as determinants of real earnings management. The study recommended that efforts should be made with respect to legislations to strengthen auditors’ quality in Nigeria since it is viable corporate governance tool towards enhancing reported earnings quality.