ORGANISATIONAL COMPLEXITY AND EARNINGS MANAGEMENT OF LISTED MANUFACTURING FIRMS IN NIGERIA: DOES INDUSTRY-SPECIALISED AUDITOR MATTER?

Increasing competition and globalization have led to the diversification of Nigerian manufacturing companies, which increased their level of complexity and managerial scope for using discretion regarding the financial reporting process. This study, therefore, examined the effect of organisational complexity on earnings management of listed manufacturing firms in Nigeria and tested whether industry-specialised auditor plays a significant role in the effect. Data were collected through the secondary source from the published annual reports of a sample of 21 manufacturing firms listed on the Nigerian Stock Exchange (NSE) as at December 2017. The study used the Ordinary Least Square (OLS) regression with robust standard errors as the technique of data analysis. The study found that industry complexity has a significant positive effect on earnings management, whereas geographic complexity negatively affects earnings management. Besides, industry-specialised auditor negatively moderates the effect of industry complexity on earnings management. The study recommended that regulatory authorities such as the Securities and Exchange Commission should encourage industrially diversified firms to be audited by the specialised auditors. This can be achieved through moral suasion.