Title page

Approval page




Table of content



1.1        Background of the study

1.2        Statement of problem

1.3        Objective of the study

1.4        Research Hypotheses

1.5        Significance of the study

1.6        Scope and limitation of the study

1.7       Definition of terms

1.8       Organization of the study




3.0        Research methodology

3.1        sources of data collection

3.3        Population of the study

3.4        Sampling and sampling distribution

3.5        Validation of research instrument

3.6        Method of data analysis



4.1    Introductions

4.2    Data analysis


5.1    Introduction

5.2    Summary

5.3    Conclusion

5.4    Recommendation
















This study examined joint audit and audit quality of listed deposit money banks, drawing evidence from auditing firms. Data were collected through statistical bulletin and published financial statement, SPSS statistical package were used to perform using descriptive statistic, Pearson Product Moment Coefficient of Correlation. Findings indicate a statistically significantly positively strong relationship between the measures of audit quality (auditor independence, technical training and proficiency and engagement performance) and financial reporting (measured in terms of reliability of financial report). Given the existence of technical training and proficiency and engagement performance, auditor independence is a prime audit quality in financial reporting. Accounting practitioners should imbibe the ethics of independence to achieve credibility and reliability required of financial reports.





                CHAPTER ONE


1.1 Background of the study

The stakeholders’ pressure on corporate managers to maintain firm’s profitability has created economic incentives for management to engage in earnings management practices. Therefore, this study examines the effects of audit quality and corporate governance on earnings management of quoted deposit money banks (DMBs) in Nigeria. This study specifically investigates the efficacy of joint audit and audit quality of listed deposit money bank, board independence, and board size on earnings management of DMBs. The consequential audit failure in Enron’s case of 2002 has brought about series of regulations and guidelines in the accounting profession and other related professions such as the 2002 US Sarbanes Oxley’s, the 2003 Nigerian Code of Corporate Governance, and the UK Financial Reporting Council, just to mention a few. However, despite the aftermath of the regulations and reporting guidelines and significant progress in the quality of audit service; there are still reported cases of audit and corporate failure perhaps stemming from earning management practice, particularly in Nigeria (Cadbury Nigeria Plc, Intercontinental Bank Plc, Savannah Bank and Bank PHB) and also across Europe, Australia and the United States, just to mention a few. Although it has not been proved by any detailed investigation that these audit failures were due to low quality of audit service or weak code of corporate governance stemming from earnings management practice, it could however reasonably be suspected to be the contributing factor. These corporate scandals have discouraged the public from having confidence in audit reports. Meanwhile, the demand for external audit was as the result of the agency problems arising from the asymmetric information between banks’ shareholders and banks’ management. Accounting records have indicated that the existence of asymmetric information between shareholders and management underpin the practice of earnings management in companies. Earnings management occurs when information asymmetry exist between shareholders and managers, shareholders have inadequate access to relevant information to monitor manager’s actions. Earning management is a strategy used by the management of a firm to deliberately manipulate the firm’s earnings so that the figures match a pre-determined benchmark. This practice is carried out for the purpose of income smoothing. Although the different methods used by managers to smooth earnings can be very complex and confusing, the vital point to remember is that the driving force behind managing earnings is to meet a pre-determined target. One of the methods of earnings management is discretionary accruals accounting (which also serve as the proxy for earnings management in the literature and in this study) which gives opportunities of discretion to management in determining the actual earnings of a bank. However, earnings are the powerful indicators of banking business activities. Since a bank’s stock is measured by the present value of its future earnings, investors and analysts look to earnings to determine the attractiveness of a particular stock. Banks with poor earnings prospects will typically have lower share prices than those with good prospects. So, earnings management plays a key role to determine the share price of a bank as well as direct resource allocation in capital markets. Manipulation of accounting records by the preparer of financial statement through recording a fictitious inventory and hiding liabilities even in the face of audited financial reports may be attributable to the stakeholders’ pressure on corporate managers to maintain profitability. Furthermore, since the values of the banks are linked to the reported earnings figures, it creates economic incentives for management to engage in earnings management. In the context of these challenges and foregoing analysis motivated this study to integrate both corporate governance and audit quality to determine the level (extent) of earnings management of DMBs in Nigeria. In 2005, the Central Bank of Nigeria mandated every Nigerian bank to increase capital base from 2 billion naira to 25 billion Naira in order to enhance competitiveness in the international market. Noteworthy capital market expectations were raised and banks were under pressure to achieve survival and generate higher returns to shareholders. This pressure from the Central Bank of Nigeria has occasioned banks falsifying accounts, inflating earnings and capital. The need for reliable reports has led to statutory audit that provides independent authentication of financial statements prepared by banks’ directors. Auditors are instructed to report financial misdemeanors in company’s accounts to increase transparency and accountability through fraud detection. Earnings are made up of accruals and cash items and accruals are basically controlled by company’s stewards. Management can bloat performance of company and future earnings predictions through manipulation of accruals resulting in earnings management. Financial reports contain accounting information which different users use to appraise firm’s performance. Investors use cash flow statement to make investment decisions thereby creating room for highly motivated and intelligent management teams to manipulate the real economic operations to influence the true picture of a company’s cash flow from operations. Since accrual accounting measures the performance of company by recognizing economic events irrespective of when transactions occur. Earnings management is therefore, discovered by conducting tests on the components of accrual assumed to be at the managerial discretionary accruals thereby revealing information asymmetries. Accounting scandals experienced in the last few years have affected the regulators’ trust of financial statements. This scandal and its consequent results are reasons for drawing attention to quality and reliability of financial statements in the banking sector. Therefore, the absence of investors’ confidence in the reported earnings influence the financial market because investors are major players in ensuring availability of capital to support the economic system. Given the above state, this study seeks to assess the effect of audit quality on earnings management in Nigerian listed deposit money banks. The broad objective of this study is to identify relationship between audit quality and earnings management of Nigerian listed money deposit banks while to assess relationship among joint audit, auditor specialization, auditor independence and audit tenure on the earnings management in the listed deposit money banks in Nigeria would need to established.


The bank credit fraud in Nigeria despite the introduction of joint audit and audit committee this has placed a question mark on the quality of audit carried out in deposit money banks (DMBs). The fraud prevalent in the financial statement of DMBs is becoming worrisome, this is because incident of a bank declaring a huge amount of profit at the close of financial year and two months later the bank has either been acquired by another bank or taken over by asset management committee of Nigeria as a result of either inability to meet the stipulated reserve or cost of operation. This and so many other instances is becoming unbecoming in the audit profession, due to the fact that questions are being asked as to the extent of reliability of the audited financial report.  Furthermore, banks default and distress have hampered their performance significantly and diminished investors‟ confidence in the banks, thereby casting doubt as to the efficacy of the audit committee functions. There are divergent views on the relationship between joint audit and audit quality in DMBs in Nigeria. Some of the arguments support the link between Corporate Governance and performance while others see no link between Corporate Governance and performance. There is a skew in approach and method on study relating to joint audit, audit committee and audit quality and the studies are mostly concentrated on studies conducted in advanced countries with more matured financial systems compared to the developing countries like Nigeria.


The main objective of this study is to examine the effect of joint audit and audit quality of listed deposit money banks in Nigeria, but to aid the completion of the study, the researcher intend to achieve the following specific objectives;

  1. i) To examine the effect of joint audit on audit quality of listed deposit money banks in Nigeria
  2. ii) To ascertain if there is any significant relationship between joint audit and audit quality of listed deposit money banks

iii) To examine the role of audit committee in ensuring quality audit work in listed deposit money banks in Nigeria

  1. iv) To examine the impact of quality audit on the reliability on the financial report by investors and potential investors


To aid the completion of the study, the following research questions were formulated by the researcher;

  1. i) Does joint audit has any effect on audit quality of listed deposit money banks in Nigeria?
  2. ii) Is there any significant relationship between joint audit and audit quality of listed deposit money banks?

iii) Does audit committee play any role in ensuring quality audit work in listed deposit money banks in Nigeria?

  1. iv) Does quality audit has any impact on the reliability on the financial report by investors and potential investors?


H0: There is no significant relationship between joint audit and audit quality of listed deposit money banks

H1: There is a significant relationship between joint audit and audit quality of listed deposit money banks

H0: joint audit does not have any effect on audit quality of listed deposit money banks in Nigeria

H2: joint audit does have an effect on audit quality of listed deposit money banks in Nigeria


It is believed that at the completion of the study, the findings will be of great importance to the management of deposit money banks as the study seek to explore the benefit of joint audit on audit quality of listed deposit money banks in Nigeria, the study will also be of great value to accounting undergraduate student as the findings of this study will give them a potential insight into the importance of auditing and accounting profession on the existence and functioning of business organization. The study will be of importance to researchers who intend to embark on a study in a similar topic as the findings of this study will serve as a reference point to further studies, finally, the study will be of significance to student, teachers, academia’s and the general public as the study will contribute to the pool of existing literature and also add to knowledge in the subject matter.


The scope of the study covers joint audit and audit quality of listed deposit money banks in Nigeria, but in the cause of the study, there are some factors that limited the scope of the study which is beyond the researchers control:

  1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
  2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.
  3. c) Finance: the finance at the disposal of the researcher is a major constrain to the scope of the study, as the researcher could not cover more grounds for the study.



Financial auditing is the process of examining an organization’s (or individual’s) financial records to determine if they are accurate and in accordance with any applicable rules (including accepted accounting standards), regulations, and laws.


An audit is a systematic and independent examination of books, accounts, statutory records, documents and vouchers of an organization to ascertain how far the financial statements as well as non-financial disclosures present a true and fair view of the concern

Joint audit

A joint audit is an audit on a legal entity by two or more auditors to produce a single audit report, thereby sharing responsibility for the audit. A typical joint audit has audit planning performed jointly and fieldwork allocated to the auditors. The auditors are typically not individuals, but auditing firms

Audit committee

An audit committee is one of the major operating committees of a company’s board of directors that is in charge of overseeing financial reporting and disclosure. All U.S. publicly-traded companies must maintain a qualified audit committee in order to be listed on a stock exchange


This research work is organized in five chapters, for easy understanding, as follows. Chapter one is concern with the introduction, which consist of the (background of the study), statement of the problem, objectives of the study, research questions, research hypotheses, significance of the study, scope of the study etc. Chapter two being the review of the related literature presents the theoretical framework, conceptual framework and other areas concerning the subject matter.     Chapter three is a research methodology covers deals on the research design and methods adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding.  Chapter five gives summary, conclusion, and recommendations made of the study.

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