EXTERNAL AUDIT ATTRIBUTES AND INCOME SMOOTHING OF LISTED BANKS IN NIGERIA

Abstract

The present study seeks to examine the effect of external audit attributes on income smoothing-INSM in listed deposit money banks in Nigeria covering a study period of ten (10) years spanning from 2012 to 2021 over ten (10) banks. The regressed is income smoothing measured by loan loss provision while the regressor is external audit attributes measured by Audit Firm Size (AFS), Non-audit Service Fees (NASF), Audit Tenure (ATN), and Joint Audit (JOA). The study covered ten selected deposit money banks listed on the Nigerian Exchange Group (NEG) as at 31st December 2021 while data were collected from the annual reports of the selected banks. Further, the ex-post facto research design was used and emphases were laid on banks’ data. The study adopted panel data multiple regression estimation technique while data were analyzed through the Eviews-9 statistical package for data analysis. The study reported that, Audit Firm Size (AFS) exerted a negative significant effect on INSM of listed deposit money banks in Nigeria. Meanwhile, Non-audit Service Fees (NASF) and Audit Tenure (ATN) exerted a positive significant effect on INSM of listed deposit money banks in Nigeria. However, Joint Audit (JOA) exerted a negative yet minimal effect on ISMN of quoted banks in Nigeria in. Hence, the paper concludes that, external audit attributes have mixed effects on ISMN tendencies of bank managers in Nigeria. As such, bank owners must ensure that they engage the services of credible auditing firms with track records of delivering reports that show the actual situation of the bank. Meanwhile, the Financial Reporting Council (FRC) should have stiffer penalty for bank managers/auditing firms caught engaging in the act of ISMN.
 Keywords: External Audit Attributes, Audit Firm Size (AFS), Non-audit Service Fees (NASF), Audit Tenure (ATN), and Joint Audit (JOA), Income Smoothing.