Moderating Effect of External Monitory Mechanism on The Relationship Between Earnings Management and Profitability of Listed Petroleum Marketing Companies in Nigeria

Abstract

This study investigates the relationship between earnings management and profitability of listed petroleum marketing companies in Nigeria and the moderating influence of external monitoring methods. Data for the years 2012 to 2022 were taken out of the sampled companies' annual reports. The results from the GMM estimator showed that the discretionary accrual, as well as the interaction between audit firm size and discretionary, have a significant impact on gross profit margin respectively. According to the study's findings, auditors are aware of earnings management, but they are far more concerned about it when their choices result in inflated rather than understated earnings. The likelihood of receiving a qualified audit report was unaffected by the interplay between audit firm size and discretionary accrual. However, this does not imply that auditors are ignorant of earnings management. The report suggests that methods for the quick detection of earnings management techniques be adopted to decrease the negative impact of earnings management on the profitability of listed petroleum marketing enterprises in Nigeria.