How do auditor attributes affect bank earnings management? Evidence from Africa

Yosra Mnif and Imen Slimi

Journal of Accounting in Emerging Economies, 2023, vol. 14, issue 4, 819-854

Abstract: Purpose - This paper aims to examine the impact of the auditor's characteristics on bank's earnings management (EM) through loan loss provisions (LLP) for African banks. Design/methodology/approach - This study is based on 360 bank-year observations from 14 African countries for the period 2011–2016, discretionary LLP is used as proxy for EM. Panel regressions have been conducted. Findings - The authors' findings reveal that auditor's industry specialization and tenure exert a negative and significant influence on the extent of LLP-based EM. The results also show that total fees paid to the banks' auditors are positively related to the extent of EM. In a further analysis, the authors find that industry specialist auditors are more effective in reducing the incoming-increasing. Similarly, the positive relationship previously found between EM and total fees still holds only for income-increasing. Moreover, auditor tenure negatively impacts both income-increasing and income-decreasing EM. As for auditor change, results reveal differential effect on EM. Originality/value - The current research extends prior literature and provides an understanding of an important external monitoring mechanism, the external audit, within African banks. To the best of the authors' knowledge, there is a paucity of cross-country studies that has addressed the influence of auditors' attributes on banks' EM in Africa.

Keywords: Auditor characteristics; Earnings management; Loan loss provisions; African banks (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jaeepp:jaee-09-2022-0255

DOI: 10.1108/JAEE-09-2022-0255

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