Tag Archives: Earnings Management

Audit Quality and Earnings Manipulations in Nigeria: Beneish Model (Published)

The significance to prepare reliable information discloses the need to fall back on an external auditor and a quality auditing process that can caution against the management of earnings. In line with the business practice, auditing does not provide sufficient coverage for some earnings management (EM) activities that result in financial statement fraud. Over the years, capital markets around the globe have witnessed numerous corporate financial scandals largely because of financial and accounting figures’ manipulation. This has led to casting doubt on the quality of published financial reports and questioning the ability of the audit process. Against this background, this study examined the relationship between audit quality and real earnings management of listed manufacturing companies in Nigeria. Specifically, this study evaluated the effect of audit firm size, audit firm industry specialization, audit firm tenure, and audit firm independence on real earnings management. The study sampled 38 out of 55 listed manufacturing companies that cut-across different sectors from 2013 to 2020. From the multivariate analysis, the findings revealed a significant relationship between audit quality (audit firm size and audit firm independence) with a p-value of 0.014 and 0.003 respectively. It was concluded that firms audited by Big-4 firms with independence attract greater publicity and tighter scrutiny; hence, companies tend to desist from managing their earnings. The study, therefore, recommended that the management of manufacturing firms in Nigeria should persist in engaging experience audit firms with international affiliations, and they should work strictly with the CAMA, 2020 as amended by rotating audit firms after every three years as this will promote the reliability of financial statement prepared by management, and finally reduce manipulation of earnings.


Keywords: Audit Firms, Audit Quality, Earnings Management, firm independence, manipulations

Usefulness of Voluntary Disclosures in Annual Reports of Listed Companies in Nigerian: An Examination of Users’ Perception (Published)

In spite of the increase in firms disclosing information beyond mandatory information to meet the broad range of users’ information needs, there is limited knowledge from Nigeria as a developing economy on whether voluntary disclosures are useful for the user’s judgments and decisions. That is, research validating that additional disclosures enhance users’ decision making is limited. The purpose of this study is to evaluate whether users in Nigeria perceive voluntary disclosures in annual reports to be useful when making investment decisions. To measure users’ perception, survey research design was employed. Relevant data were obtained from survey of seven user groups (Investors, Accounting Practitioners, Regulators, Financial analysts, Academics, Customers and Students) in South East Zone of Nigeria to test the hypothesised usefulness.   Empirical results were obtained through one sample t-test using SPSS software. Results revealed that voluntary disclosure of forward looking information is reliable for detecting earnings management. Voluntary disclosure of sustainability, environmental and social issues provide better understanding of companies’ long term performance. Based on the findings, it was recommended among other things that companies in Nigeria should adopt voluntary disclosures to supplement the conventional reporting model, since the new forward looking reporting framework create longer term value, and also drives quality capital market decisions.

Citation: Emeka-Nwokeji, N. A.,  Ekwueme, C. M.,Okeke, P. C.(2021) Usefulness of Voluntary Disclosures in Annual Reports of Listed Companies in Nigerian: An Examination of Users’ Perception, International Journal of Business and Management Review,Vol.9, No.5, pp.22-48

Keywords: Earnings Management, Perception, Reliability, Usefulness, Voluntary Disclosure, forward looking information

Board Characteristics and Earnings Management: Empirical Analysis of UK Listed Companies (Published)

Present study investigates to find out the associations between characteristics of the boards and the level of earnings management. For the investigation, level of the earnings management has taken from UK listed companies during 2012 to 2016. Moreover, the abnormal accruals are considered as the proxy of the level of earnings management, and which show the level of earnings management for the companies. The study uses Modified-Jones model to measure the abnormal accruals, and uses Random effects model to find out whether the characteristics of the boards are related with the level of earnings management. By running the regression, it finds out that the CEO duality and board size are negatively related the level of earnings management at the significant level. However, the study fails to find out the board meetings, percentage of independent directors and the percentage of female directors in the board is significantly associated with the level of earnings management.

Keywords: Accruals, Corporate Governance, Earnings Management, dependent variables, independent variables

The Association between Audit Quality and Earnings Management by Listed Firms in Nigeria (Published)

This study examines the association between audit quality and earnings management by listed firms in Nigeria. The study measures audit quality by audit firm size and earnings management by the absolute abnormal discretionary accruals using the modified Jones model. The study was carried out in two parts, the first part is the comparative study using independent sample t-test and the Wilcoxon signed ranked test. The second part is the multivariate analysis where the association between audit quality and earnings management was examined. Based on our analysis, we found that auditor size has restrained earnings management but the decrease is not statistically significant. The implication of this finding is that users should not blindly assume that high audit quality proxy by the big 4 auditor is a symbol of earnings quality.

Keywords: Audit Quality, Earnings Management, Nigeria, auditor size

Effect of Corporate Governance and Ownership Structure on Earnings Management of Brewery Industry (Published)

The purpose of this paper is to investigate the effect of cooperate governance and ownership structure on earnings management of Brewery industries. 2004to 2013 was the period used for this study .Regression technique, was used to analyses the data, the result shows that CEO and Managerial ownership have positive significant effect on Earning management, the findings also reveal that price earnings ratio, Net assets per share of firm affect Earning Management.

Keywords: Earnings Management, Institutional Investors, Net asset per share, Price Earnings ratio and Brewery Industries


This paper investigates the differences in the quality of accounting information Pre and post IFRS adoption by manufacturing firms in Nigeria over a five year period. Multiple regression analysis was performed on accounting quality variables and t-test was carried out for equality of mean to compare pre and post IFRS. Results indicate a decline in accounting quality using earnings management, value relevance, and timely loss recognition as independent variables. Earnings and book value of equity are less value relevant and timely loss recognition is less in post-IFRS compared to pre-IFRS period

Keywords: Accounting quality, Earnings Management, IFRS, Timely loss recognition, Value Relevance


: The objective of this study is to investigate the effects of changes from Malaysia and Nigeria previous accounting standards to IFRSs-based standards on earnings management of Malaysia and Nigeria banks. Limited studies on the association between IFRS and earnings management in emerging economies and the continuous exclusion of financial institutions from samples of prior studies motivated this study to acquire the banking sector of two emerging countries – Malaysia and Nigeria in order to investigate whether changes in Malaysia and Nigeria accounting standards affects earnings management activities. Hence, this study used a sample of 23 banks representing 8 Malaysian banks and 15 Nigerian banks for a study period of 4 years (2009-2012). This study modified the Jones (1991) model to investigate earnings management in the banking sector. The modified Jones model is able to investigate earnings management in the banking sector. MFRSs and IFRSs impact more significantly and positively on the quality of accounting information of banks than the previous FRSs and SASs respectively for Malaysia and Nigeria. Specifically, the accrual and earnings quality of Nigerian banks has improved by approximately 41% and Malaysia banks 12.6% during the IFRSs/MFRSs adoption era. This study therefore recommends that globally, IFRSs should be adopted as the standard for the preparation and reporting of financial statements

Keywords: Accounting Standards, Discretionary Accruals, Earnings Management, Ifrss, Jones Model, Mfrss, Non-Discretionary Accruals, Total Accruals


This study follows prior studies on cash – based activities manipulations to investigate total levels of cash – based earnings management relative to the association between cash – based earnings management and audit firm size of companies in Nigeria. First, the study measures the normal level of real activities by focusing on three manipulation schemes namely, manipulation of sales, overproduction, and reduction in discretionary expenses. The normal levels of each type of real activities manipulation were measured as the residual from relevant estimation models. The abnormal CFO, abnormal production costs and abnormal discretionary expenses were computed as the difference between the actual values and the normal levels predicted from the respective models while the composite value of the three variables is the estimate for cash – based earnings management. Based on a sample of 342 companies – year observations from the NSE and applying audit firm size as a measure, comprehensive multivariate analyses were conducted on archival data covering 2006 – 2011. The result showed that audit firm size exerts significant negative relationship with cash – based earnings management of quoted companies in Nigeria. It is suggested that companies in Nigeria should improve their earnings quality only through sales growth and cost control strategies and present distinct reports on earnings quality; company auditors should issue Integrated Audit Quality Assurance Reports based on earnings quality assessments statutorily backed by earnings monitoring of companies in Nigeria; while regulatory agencies should issue authoritative codes of best practice in Nigeria

Keywords: Audit Firm Size, Audit Quality, Cash Flow from Operations., Earnings Management, Earnings Quality


Auditor Tenure defines the length of the auditor-client relationship while auditor independence (measured by the quantum of audit fees received) defines an auditor’s quality of being free from influence, persuasion or bias, and hence the unbiased mental attitude in making decisions throughout the audit and financial reporting process. The absence of independence may greatly impair the value of the audit service and the audit report. On the other hand, an excessively long association between the auditor and his client may constitute a threat to independence. This study examines the relationship and effects of auditor tenure and auditor independence on the earnings management (measured by the amount of discretionary accruals) of companies in Nigeria. The study relies on secondary data derived from various companies’ financial statements and the Nigerian Stock Exchange fact book to determine and measure the level of earnings manipulations in corporate financial statements, applying an all-inclusive multivariate analysis. The empirical analysis using a total of 342 company year observations, shows that Audit tenure and auditor independence exert significant effects and exhibit significant relationship with the amount of discretionary accruals of quoted companies in Nigeria. The descriptive statistics result reveals a minimal presence of discretionary accrual management by the companies in the sample and on the average; about 94% of the companies engage their audit firms for over three years, with a considerable experience of a substantial number of audit firms in this distribution

Keywords: Auditor Independence, Auditor Tenure, Auditors Reports, Discretionary Accrual, Earnings Management

Investigating the relation of independence of boards of directors with earning: evidence from listed firms in Tehran stock exchange (Review Completed - Accepted)

The purpose of this article is to investigate the relation of companies’ board of directors and its composition with annual earnings. The sample of this research is 61 of registered firms in Tehran Stock Exchange which have complete financial information and reports about the composition of their board of directors from 2008 to 2013. The results shows that board of directors with more independent managers have made much more earnings, therefore have direct influence on profit of firms. Thus, we can claim that board of directors is a vital factor for stock exchange firms for being profitable. The result in this research is in line with previews researches in this field. We conclude that firms with more independent managers on their board of directors are more profitable than those with less independent managers on their board of directors.

Keywords: Board Of Directors, Earnings Management, Tehran stock exchange