THE EFFECT OF ORGANIZATIONAL COMPLEXITY AND AUDITOR CHOICE ON EARNINGS MANAGEMENT IN NIGERIAN LISTED MANUFACTURING FIRMS: A SECTOR-SPECIFIC ANALYSIS

Abstract

The increase in organisational complexity has increased the scope for earnings management in the global business environment. This paper aims to study the relationship between organisational complexity and earnings management, with a focus on the Nigerian manufacturing companies. Emerging economies like Nigeria are characterised by high concentrated ownership and weak investor protection, which worsens the situation. This paper explores the role of corporate diversification, industrial and geographical complexity on earnings management tendencies of firms and their financial reporting practices. Using the cases of Cadbury Nigeria PLC and Lever Brothers (now Unilever) Nigeria Plc, the paper highlights the need for understanding the relationship between complexity and earnings management. The study employs a qualitative research methodology, utilising both primary and secondary data sources. The findings suggest that organisational complexity and corporate diversification increase the scope for earnings management, particularly in the manufacturing sector. The results provide valuable insights into the nature of corporate financial reporting in developing economies with high information asymmetry. The paper recommends that regulators and auditors should focus on scrutinising the financial reports of the complex firms and monitoring the management's decisions