RELATIONSHIP BETWEEN AUDIT QUALITY ATTRIBUTES AND EARNINGS QUALITY OF SELECTED DEPOSIT MONEY BANKS IN NIGERIA

Abstract

This study investigates the relationship between audit quality attributes and earnings quality of selected deposit money banks in Nigeria. Using an ex-post facto research design, data were obtained from the audited financial statements of ten purposively selected banks listed on the Nigerian Exchange Group for the period 2015–2024. Audit quality attributes examined include Audit Firm Size (AFS), Audit Fees (AUF), Audit Independence (AUI), and Audit Tenure (AUT), while earnings quality was measured using Discretionary Accruals (DA). Descriptive statistics and Pearson Product Moment Correlation Matrix were used for analysis. The results reveal a strong positive correlation between Audit Firm Size and Audit Fees (r = 0.7445), and between Audit Firm Size and Earnings Quality (r = 0.6219). Audit Fees also showed a positive correlation with Earnings Quality (r = 0.5308), although a strong negative relationship was found between Audit Fees and Audit Independence (r = -0.8377). Audit Independence exhibited a strong positive correlation with Earnings Quality (r = 0.7074), underscoring its critical role in reducing earnings manipulation. Audit Tenure had a moderate positive correlation with Earnings Quality (r = 0.6246), but a negative correlation with Audit Fees (r = -0.7132), and a positive correlation with Audit Independence (r = 0.6987). These findings indicate that larger audit firms, higher audit fees, and auditor independence significantly improve earnings quality. However, prolonged audit tenure poses both opportunities and risks. The study recommends enhanced regulatory oversight to maintain auditor objectivity while balancing tenure and fee structures, ensuring transparent and high-quality financial reporting in the Nigerian banking sector.