Moderating Effect of Audit Committee Financial Expertise on The Relationship Between Audit Quality and Earnings Management of Listed Financial Services Firms in Nigeria

The credibility of financial reporting is undermined when earnings management occurs, posing risks to stakeholders, investors, and the overall financial system. This study examined the moderating effect of audit committee financial expertise on the relationship between audit quality and earnings management of listed financial services firms in Nigeria, from 2012 to 2023. The population comprises all the 45 quoted financial service firms in Nigeria while filtering criteria was used to arrive at a sample size of thirty-two (32) financial firms. The hypotheses were tested using robust random effect regression model after conducting some diagnostics tests. The results of the first model showed that audit tenure and audit committee financial expertise have insignificant positive effects on earnings management of listed financial services firms in Nigeria.  Further results based on the second model indicates that audit committee financial expertise significantly moderates the relationship between audit fees and earnings management of listed financial services firms in Nigeria. Also, audit committee financial expertise moderates the relationship between audit tenure and earnings management of listed financial services firms in Nigeria. However, audit committee financial expertise does not significantly moderate the relationship between audit firm size and earnings management. Also, audit committee financial expertise does not significantly moderate the relationship between the non-audit services and earnings management of listed financial services firms in Nigeria. The study recommends among others that financial services firms should engage auditors for non-audit services that directly enhance financial reporting processes, such as internal controls and compliance-related services. In addition, non-audit services should be strategically utilized to address areas of operational and financial risk. The Financial Reporting Council of Nigeria (FRCN) should also establish clearer conflict-of-interest guidelines and cooling-off periods that prevent audit committee members with financial expertise from developing relationships that compromise their objectivity, particularly in firms where auditors also provide non-audit services.