Can Big4 Auditors Mitigate the Real Earnings Management? Evidence from Nigerian Listed Firms

Abstract

In this study, we examine the impact of Big4 auditors on the real earnings manipulation of listed companies in Nigeria. The paper uses the sample of 80 non-financial companies listed on the floor of Nigerian Stock Exchange for the period between 2012-2016. The data was extracted from the annual reports of the sampled companies and Thomson Reuters Data stream. Using a panel data regression with standard error, the result shows that Non Big4 auditors are more likely to mitigate the real earnings manipulation since they have better knowledge on the local operating environment compared to Big4 auditors. Interestingly, we find that CEO financial expertise plays a significant role in reducing the frequency of real earnings manipulation. The finding informs the regulators and other stakeholders on the roles of local auditors in restraining the trend of real activities manipulation in Nigeria.