|dc.description.abstract||The study appraised the effectiveness of auditor independence regulations in Nigeria; examined the trend of earnings quality and analysed the factors influencing auditor independence. It also investigated the influence of audit fees on earnings quality and analysed the influence of audit committee characteristics on earnings quality of listed companies in Nigeria. These were with a view to providing information on the impact of auditor independence on the earnings quality of listed companies in Nigeria.
The study employed both primary and secondary data. The population for the study consisted of 194 firms; Finance Director/Chief Accounting Officers of quoted firms; Statutory Auditors and Financial Analysts. Purposive sampling technique was used to select 65 financial and non-financial firms quoted on the Nigerian Stock Exchange (NSE). These comprised 15 financial firms and 50 non-financial firms selected on the basis of continuity in transaction and availability of complete data during the study period. Primary data, with the aid of structured questionnaire, were sourced from Finance Director/Chief Accounting Officers of quoted firms (150); Statutory Auditors (110) and Financial Analysts (90) on the effectiveness of auditor independence regulations and factors influencing auditor independence in Nigeria. The respondents were purposefully selected on the basis of their professionalism in corporate and financial matters. Secondary data on control variables, auditor independence, audit committee characteristics and earnings quality were sourced from the audited Annual Reports and Accounts of the sampled firms and from the NSE factbooks. Data were analysed using content analysis, mean, relative importance index, mean index score, percentages, graphs, tables and Generalised Methods of Moments.
The results of the effectiveness of auditor independence regulations showed that; restriction on advertising with mean index score (MIS) of 4.08; the number of statutory auditors performing the audit (MIS = 3.78); installation of audit committee (MIS = 3.78); restrictions on the unsolicited offering of service (MIS = 3.57); restrictions on the length of audit mandate (MIS = 3.56); approval of the appointment of a statutory auditor by any party other than the appointing party (MIS = 3.54); and limiting auditors from becoming financially dependent on an individual client (MIS = 3.53) were considered effective. The trend analysis results showed that earnings quality improved between 2006 and 2007 (42.15%) but declined in 2008 (46.47%). However, there was consistent improvement in the earnings quality in year 2009, 2010 and 2012 (37.46%, 79% and 97.28%), with a decline in 2013.
The results of the factors influencing auditor independence revealed that BIG4 (t= -1.981, p<0.05); audit tenure (t=-1.78, p<0.05); profitability (t=-2.26, p<0.05); leverage (t=-1.49, p<0.05); and inventory with account receivable (t=-2.10, p<0.05) had negative significant influence on auditor independence, while size of the firms (t=2.36, p<0.05); and loss (t=2.45, p<0.05) had positive influence on auditor independence in Nigeria. Furthermore, the results of the effect of audit fees on earnings quality showed that, audit fees (t=-3.25, p<0.05) had negative significant impact on earnings quality, while previous year earning quality (t=-5.62, p<0.05); size of the firm (t=3.58, p<0.05); and growth of the firm (t=13.62, p<0.05) had positive significant impact on earnings quality, unlike leverage (capital structure) with negative significant impact (t=-8.23, p<0.05). Finally, the results showed that audit committee meeting had a negative significant impact on earnings (t=-6.19, p<0.05), while audit committee size (t=0.175, p>0.05) and management ownership (t=0.055, p>0.05) had positive but insignificant impact on earnings quality. Also, audit committee independence (t=-0.86, p>0.05) and board size (t=-1.06, p>0.05) were found to be negatively related to earnings quality but not significant.
The study concluded that auditor independence and audit committee characteristics were major factors to be considered in the determination of earnings quality among listed companies in Nigeria.||en_US