Moderating Effect of Audit Committee Financial Expertise on the Relationship Between Audit Firm Size, Audit Fee and Earnings Management of Listed Deposit Money Banks in Nigeria

Abstract

This seminar investigates the moderating effect of audit committee financial expertise on the relationship between audit firm size, audit fee, and earnings management among listed Deposit Money Banks in Nigeria. The study is motivated by the persistent incidence of earnings management despite strengthened corporate governance mechanisms. An ex-post facto research design was adopted using secondary data from the annual reports of 10 listed banks over a ten year period (2016–2025), yielding 100 firm-year observations. Earnings management was measured using discretionary accruals based on the Modified Jones Model, while audit firm size, audit fee, and audit committee financial expertise were appropriately proxied. Data were analysed using descriptive statistics, correlation, and moderated multiple regression techniques. Findings reveal that audit firm size has a significant relationship with earnings management, whereas audit fee shows a negative but insignificant effect. The results further indicate that audit committee financial expertise does not significantly moderate the relationship between audit firm size, audit fee, and earnings management. The study concludes that although audit-related factors influence earnings management, the presence of financial expertise in audit committees alone is insufficient to strengthen monitoring effectiveness. It recommends enhancing the independence and active oversight functions of audit committees to improve financial reporting quality.