Purpose The purpose of this paper is to examine the impact of Auditor’s Industry Specialization (AIS) and Sustained Industry Specialization (SIS) on Earnings Management (EM) within the African banking sector. It assesses EM using the absolute value of Discretionary Loan Loss Provisions (|DLLP|) and the absolute value of Negative Discretionary Loan Loss Provisions (|NEGDLLP|). Design/methodology/approach The models are estimated across a multivariate regression analysis using both the ordinary least squares method and the generalized least squares method. The samples, spanning an 11-year period (2013–2023) across nine African countries, consist of 606 and 437 bank-year observations when using |DLLP| and |NEGDLLP|, respectively. Findings This study indicates that AIS is not always effective in curbing the opportunistic behaviour of African banks through DLLP. However, when examining SIS, EM is more effectively detected by auditors with 7–9 years of experience as industry specialists. Beyond this range, the detection effectiveness is completely reversed. Practical implications These findings may have profound implications for researchers and financial statement users. They also urge African regulators, supervisory authorities and legislators to reconsider mandatory partner/audit-firm rotation by adopting a risk-based approach that recognizes its strict relation to the SIS. Such approaches can enhance transparency, strengthen economic trust and support community well-being. Originality/value This study is among the first to control the impact of SIS, as a key factor influencing specialist auditors, on LLP-based EM in an understudied and a unique context, where the development of knowledge is paramount.
Mnif et al. (Thu,) studied this question.