Research Article Open Access Jayeola et al., Int J Account Res 2017, 5:2 DOI: 10.4172/2472-114X.1000159 Research Article OMICS International International Journal of Accounting Research I n t e r n a t i o n a l J o u r n a l o f A c c o u n t i n g R e s e a r c h ISSN: 2472-114X Volume 5 • Issue 2 • 1000159 Int J Account Res, an open access journal ISSN: 2472-114X Keywords: Joint audit; Audit specialization; Audit independence; Audit tenure; Audit quality Introduction In recent times, the call for reliable fnancial reporting has gained prominence in Nigeria and global economy at large. Te capability or incapability of banks to efectively fulfll intermediate mandate has been the crux of many fnancial crises. Mediating between the surplus and defcit units within the economy expedites distribution of national savings, thereby improving investments and national output. In 2005, the Central Bank of Nigeria mandated every Nigerian bank to increase capital base from 2 billion naira to 25 Billion Naira in order to enhance competitiveness in the international market. Noteworthy capital market expectations were raised and banks were under pressure to achieve survival and generate higher returns to shareholders. Tis pressure from the Central Bank of Nigeria has occasioned banks falsifying accounts, infating earnings and capital. Te need for reliable reports has led to statutory audit that provides independent authentication of fnancial statements prepared by banks’ directors. Auditors are instructed to report fnancial misdemeanors in company’s accounts to increase transparency and accountability through fraud detection. Earnings are made up of accruals and cash items and accruals are basically controlled by company’s stewards. Management can bloat performance of company and future earnings predictions through manipulation of accruals resulting in earnings management. Financial reports contain accounting information which diferent users use to appraise frm’s performance. Investors use cash fow statement to make investment decisions thereby creating room for highly motivated and intelligent management teams to manipulate the real economic operations to infuence the true picture of a company’s cash fow from operations. Since accrual accounting measures the performance of company by recognizing economic events irrespective of when transactions occur. Earnings management is therefore, discovered by conducting tests on the components of accrual assumed to be at the managerial discretionary accruals thereby revealing information asymmetries. Accounting scandals experienced in the last few years have afected the regulators’ trust of fnancial statements. Tis scandal and its consequent results are reasons for drawing attention to quality and reliability of fnancial statements in the banking sector. Terefore, the absence of investors’ confdence in the reported earnings infuence the fnancial market because investors are major players in ensuring availability of capital to support the economic system. Given the above state, this study seeks to assess the efect of audit quality on earnings management in Nigerian listed deposit money banks. Te broad objective of this study is to identify relationship between audit quality and earnings management of Nigerian listed money deposit banks while to assess relationship among joint audit, auditor specialization, auditor independence and audit tenure on the earnings management in the listed deposit money banks in Nigeria would need to established. Literature Review Concept of earnings management and quality Earnings management and earnings quality are closely related concepts and researchers generally agree that highly managed earnings *Corresponding author: Olabisi Jayeola, Department of Accounting, College of Management Sciences, Federal University of Agriculture, Abeokuta, Nigeria, Tel: 08033549625; E-mail: jayeolaolabisi@yahoo.com Received May 10, 2017; Accepted June 03, 2017; Published June 15, 2017 Citation: Jayeola O, Agbatogun Taofeek O, Akinrinlola Toluwalase O (2017) Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks. Int J Account Res 5: 159. doi:10.4172/2472-114X.1000159 Copyright: © 2017 Jayeola O, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Abstract The incessant failure of Nigerian deposit money banks has raised queries on audit quality in the Nigerian banking sector. Hence, the study examined relationship between Audit Quality and Earnings Management in Nigerian listed deposit money banks. The study adopted a longitudinal research design and secondary data covering a period of 2005-2014 were collected. The population of the study comprised ffteen (15) deposit money banks listed on Nigerian Stock Exchange as at 2016, out of which six (6) banks were randomly selected resulting in 60 observations. Panel data technique was employed, while fxed and random effects model were used for estimation. Descriptive Statistics, Pearson correlation coeffcient and simple pooled OLS regression analysis were used for analysis to determine possible link between the variables identifed. The results of the study showed that a signifcant positive relationship existed between joint audit and earnings management (β1=1.054533; t=2.34; and p=0.0023<0.05), which implies that a change to joint audit from single audit increases earnings management. Also, a signifcant negative relationship existed between audit specialization and earnings management (β2=-0.0302366; t=-2.07; and p=0.043<0.05), which implies that every unit increase in audit specialization decreases earnings management. Furthermore, a signifcant positive relationship existed between audit independence and earnings management (β4=is 0.6010025; t=4.96; p-value at 0.008<0.05). However, there was an insignifcant negative relationship between audit tenure and earnings management (β2=-0.0078915; t=-0.12; p=0.906>0.05). The study concluded that lengthy audit tenures were mechanisms adopted by banks’ managers to infuence auditors’ objectivity in the course of audit assignment. Therefore, the study recommended that lengthy audit tenure be discouraged. Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks Olabisi Jayeola*, Agbatogun Taofeek O, and Akinrinlola Toluwalase O Department of Accounting, College of Management Sciences, Federal University of Agriculture, Abeokuta, Nigeria