The role of forensic auditing in curbing earnings manipulation: A cross-industry analysis in emerging economies

This research seeks to examine the role of forensic auditing on the prevention of earnings manipulation in 5 selected industries in Nigeria from 2015 to 2024 with particular attention to the relationship among the three issues of financial reporting credibility namely: the intensity of forensic audit, corporate governance and the independence of the auditors. Using quantitative research design and panel data of 500 firm observation from 50 listed companies, the study used a fixed effects regression model to determine the degree to which forensic auditing affects the practise of earnings manipulation. The result obtained from the descriptive indicates moderate variations in earnings manipulation levels across the firms whereas the result obtained from the correlation analysis indicate that there are significant negative associations between earnings manipulation and both forensic auditing and corporate governance. Results from the regression confirm that forensic audit intensity (b=-0.204, p<0.01), corporate governance (b=-0.175, p<0.01) and audit independence (b=-0.114, p<0.01) have a significant negative impact on earnings manipulation. Firm size (which is negative) was only marginally significant. These results show that forensic auditing provides an important deterrent to financial misreporting, especially when backed up by good governance and auditor independence mechanisms. The study concludes that institutionalising forensic audit practises, improving governance structures, and ensuring auditor autonomy are important for improving financial transparency in emerging economies.