Audit Quality and Income Smoothing Among Listed Deposit Money Banks in Nigeria

Document Type : Review article

Authors

1 Department of Accounting, Faculty of Management Sciences, Osun State University, Osogbo.

2 Department of Accounting , osun state University, Osogbo, Nigeria

3 Department of Accounting, Faculty of Management Sciences, Osun state University, Osogbo

4 Accounting, Faculty of Management Sciences, Osun State University

5 Department of Economics, Faculty of Social Sciences, University of Ilorin, Nigeria,

10.22067/ijaaf.2025.45230.1441

Abstract

The study examined how audit quality impacted income smoothing practices among listed Nigerian deposit money banks (DMBs). While audit quality (AQ) was represented by audit fees (AF), audit firm size (AFS), and audit tenure (AT), income smoothing (IS) was represented by binary variables obtained from the Eckel index of income smoothing. Data were obtained from eleven (11) listed banks from 2013 to 2021. Binary logistic regression was employed. The results indicated that AF is positively associated with IS. In addition, the impact of AFS represented by Big 4 on income smoothing was negative, while that of audit tenure was positive but not significant. The results were similar when the accrual measure of income smoothing was used. The study concluded that the quality of audits determines the tendency for income smoothing among Nigerian listed banks. Therefore, regulators and the management of listed DMBs in Nigeria should emphasize and employ the services of large, reputable audit firms (BIG 4), as it appears to be negatively related to income smoothing. In addition, auditors should be well remunerated to ensure that they exert significant effort to mitigate the incidence of income smoothing.

Keywords

Main Subjects

©2025 The author(s). This is an open access article distributed under Creative Commons Attribution 4.0 International License (CC BY 4.0)

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