Impact of External Audit Characteristics on Earnings Management in Listed Consumer Goods Companies in Nigeria

This study examines the impact of external audit characteristics on earnings management in listed consumer goods companies in Nigeria. Specifically, it investigates whether audit firm size, audit tenure, auditor type, and joint audit arrangements significantly influence earnings management, while controlling for firm size, firm age, leverage, and sales growth. Anchored on agency theory, information asymmetry theory, signalling theory, stakeholder theory, institutional theory, and the policeman theory, the study adopts a quantitative ex-post facto research design within a positivist framework. Panel data were obtained from audited annual reports of 16 consumer goods firms listed on the Nigerian Exchange Group (NGX) over the period 2006–2022. The data were analysed using panel regression techniques to test the hypothesised relationships and the empirical results reveal that external audit characteristics collectively have a statistically significant effect on earnings management (Wald χ² = 24.95; p = 0.0016). However, the individual effects of audit firm size, audit tenure, auditor type, and joint audit were all negative but statistically insignificant, suggesting that these audit attributes do not independently constrain earnings management in the Nigerian consumer goods sector. The study concludes that while external audit characteristics jointly matter in explaining earnings management behaviour, their standalone effects are weak in the presence of firm-specific factors. The recommends the need for stronger institutional enforcement and complementary governance mechanisms to enhance the effectiveness of external audit structures in curbing earnings manipulation in emerging markets.