AUDITOR INDEPENDENCE AND EARNINGS MANAGEMENT

ABSTRACT

This study examines auditor independence and earnings management. It is a modification of the work of Arslan 2019 in Finnish land. The study tends to validate Arslan work in Nigeria. The importance of auditor independence even in this modern technological advancement era where machines are preferred to personnel in today’s world cannot be ignored. Managers tend to use their biased tool especially fees to manipulate the interest and decisions of the auditor for their personal interest. The study employed already existing archival panel data that are beyond manipulation. A total number of 35 commercial and insurance companies listed on the Nigeria Exchanged Group (NGX) were observed from 2016 to 2020. Jaque-Berra test probability value was used on our broad objective out of which 4 specific objectives surfaced. Modified discretionary accrual model was used as earnings management of firms. The independent variable was collapsed into 4 which are; audit fee, non-audit fee, and audit tenure and audit firm rotation with size as our control variable. Panel least square regression technique was employed: descriptive statistics and correlation analysis were used to investigate the background properties of the variables. In the course of the study, it was found that audit fee has positive and significant relationship with earnings management, audit tenure and non-audit fee have no significant but are positively related to earnings management while audit firm rotation is negatively insignificant with earnings management and control variable is negatively related but highly significant to dependent variable.