Effect audit pricing on earnings management among non-financial listed firms in Nigeria.

This study investigates the effect of audit pricing, measured through normal and abnormal audit fees, on real earnings management (REM) in Nigerian non-financial listed firms. Using panel data from 50 firms listed on the Nigerian Exchange Group between 2013 and 2022, and employing Roychowdhury’s (2006) real earnings management model, the study finds a statistically significant negative relationship between normal audit fees and REM, β = -0.046, p = 0.0113. This suggests that higher audit fees, reflecting better audit quality and effort, deter managerial manipulation of earnings. Audit tenure also negatively correlates with REM, indicating that longer auditor-client relationships may enhance audit effectiveness. However, firm age, size, and loss indicators show no significant impact. The findings support agency theory’s premise that adequate audit remuneration mitigates agency conflicts by constraining managerial opportunism. Despite some contrasting literature, results emphasize the strategic importance of fair audit pricing to uphold financial reporting integrity. The study recommends that regulators enforce guidelines ensuring fair audit pricing linked to service quality, companies invest in high-quality audits as part of good governance, and auditors promote transparency in fee attribution to reinforce audit credibility. This research contributes empirical evidence to the nuanced relationship between audit fees and earnings management in emerging markets like Nigeria, highlighting audit pricing as a critical mechanism for enhancing audit quality and financial reporting transparency.

Authors

Institutions

Publication Details

Journal
FUDMA Journal of Accounting and Finance Research [FUJAFR]
Published
2025-06-30
DOI
https://doi.org/10.33003/fujafr-2025.v3i2.206.262-273
Primary Topic
Corporate Governance and Financial Management
Type
article
Field-Weighted Citation Impact
0.00
Controls
|||
ALL TIME
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
article

Effect audit pricing on earnings management among non-financial listed firms in Nigeria.

Aderemi Olalere Adebayo, Johnson Kolawole Olowookere, Titilayo Moromoke Oladejo, Fatimat Olajide
FUDMA Journal of Accounting and Finance Research [FUJAFR]
Corporate Governance and Financial Management
article

Effect audit pricing on earnings management among non-financial listed firms in Nigeria.

Aderemi Olalere Adebayo, Johnson Kolawole Olowookere, Titilayo Moromoke Oladejo, Fatimat Olajide
article en

Abstract

This study investigates the effect of audit pricing, measured through normal and abnormal audit fees, on real earnings management (REM) in Nigerian non-financial listed firms. Using panel data from 50 firms listed on the Nigerian Exchange Group between 2013 and 2022, and employing Roychowdhury’s (2006) real earnings management model, the study finds a statistically significant negative relationship between normal audit fees and REM, β = -0.046, p = 0.0113. This suggests that higher audit fees, reflecting better audit quality and effort, deter managerial manipulation of earnings. Audit tenure also negatively correlates with REM, indicating that longer auditor-client relationships may enhance audit effectiveness. However, firm age, size, and loss indicators show no significant impact. The findings support agency theory’s premise that adequate audit remuneration mitigates agency conflicts by constraining managerial opportunism. Despite some contrasting literature, results emphasize the strategic importance of fair audit pricing to uphold financial reporting integrity. The study recommends that regulators enforce guidelines ensuring fair audit pricing linked to service quality, companies invest in high-quality audits as part of good governance, and auditors promote transparency in fee attribution to reinforce audit credibility. This research contributes empirical evidence to the nuanced relationship between audit fees and earnings management in emerging markets like Nigeria, highlighting audit pricing as a critical mechanism for enhancing audit quality and financial reporting transparency.

FUDMA Journal of Accounting and Finance Research [FUJAFR]Vol. 3(2)
Osun State University (NG)
Openalex Percentile: Top 71%
Corporate Governance and Financial Management
AI Navigator

Ask Laika to Summarize, Analyze, and Connect papers live on the map.

Summarize Papers & Methodologies

Extract key findings, datasets, and comparative methods across publications.

Benchmark Rankings & Visual Analytics

Rank top research institutions, authors, funders, topics, and journals by Field-Weighted Citation Impact (FWCI) and paper volume with instant charts.

Connect Distant Disciplines

Bridge topological clusters on the map to find hidden collaborative intersections.