The Impact of Auditor Qualifications on Earnings Management of Companies Listed on the Borsa İstanbul Industrial Index (original) (raw)
Related papers
Audit Quality and Earnings Management: Evidence from Turkey
Uluslararası İktisadi ve İdari İncelemeler Dergisi, 2019
Earnings management is one of the controversial issues in the current business environment. The value relevance of earnings is adversely influenced by earnings management. The objective of this study is to analyze the association between audit quality and earnings management for non-financial firms quoted on Borsa Istanbul. Ordinary least square regression analysis is employed in this study in analyzing the association between earnings management and audit quality. Three different proxies for audit quality (auditor independence, audit industry specialization and auditor tenure) were analyzed based on a sample of 97 nonfinancial firms quoted on Borsa Istanbul from 2013 to 2018. Empirical analysis indicates that auditor independence and audit industry specialization are significantly negatively related with likelihood of earnings management and long-term auditor and client relationship enables the management of firms to more actively engage in earnings management. This paper finds support for the notion that the high-quality audit is one of the prominent factors that can mitigate earnings management practices.
Big Four Auditors' Audit Quality and Earnings Management: Evidence from Turkish Stock Market
Audit quality is considered as one of the factors affecting the reliability of financial information. Theoretical arguments and research findings suggest that audit quality constrains earnings management. Given that auditor's incentives to provide high quality audit is rather limited in emerging economies, the argument suggesting audit quality constrains the earnings management is likely to be questioned. The aim of this study is, therefore, to assess the effect of audit quality on earnings management by focusing on Turkish case, where auditor's incentives to provide high quality audit is limited. Using a sample of manufacturing industry firms listed on Istanbul Stock Exchange (ISE) for the years 2003-2007, we find that audit firm size as proxy for audit quality, does not have an impact on discretionary accruals. These results indicate that there is no difference in audit quality between Big Four and non-Big Four audit firms for restriction of earnings management in Turkey.
Audit Decision: Interaction between Earnings Management and Audit Specialization
2021
This research is purposed to get emperical evidence about the interaction influence of earnings management and audit specialization on audit decision. The population of this research are all manufacturing companies consistently listed and active in Indonesia Stock Exchange from the year of 2016 to 2018. This research uses 86 samples of manufacturing companies selected through purposive sampling method resulting in 258 data to be analyzed using binary logistic regression. The result of this study indicates that the interaction between earnings management and audit specialization influence positive and significant on audit decision. Investors can make the auditor decision and auditor specialization as a consideration in investing. Auditor specialization can detect earnings management and auditors tend to give qualified opinion. The company's goal to do earnings management is to obtain an unqualified opinion. Audit specialization can reveal the existence of earnings management and ...
There are many researches in relation of earnings management and audit quality. However, there are three ways to earnings management: 1. Accruals earnings management 2. Real activities manipulation and 3. Shifting of core expense; the famous methods to earnings management are accruals earnings management and real activities manipulation. This research investigates the relationship between audit firm size and cash – based earnings management (real earnings management) for the companies listed on Tehran Stock Exchange. Financial managements have more incentives for earnings management by real activities than accruals. The sample consists of 61 companies in the period 2008-2012 and for testing the hypothesis the statistical panel data regression was exerted. For measuring real earnings management have used the model developed by Cohen and Zarowin (2010). The results show that there is not a relationship between audit firm size and real earnings management. This means that, big audit firm are not more capable than small audit firms in finding real earnings management. In addition, the results show that there is a positive relation between firm size and a negative relation between financial leverage and firm growth with real earnings management.
The Effect of Audit Firm Specialization on Earnings Management and Quality of Audit Work
This paper aims at investigating the effect of industry specialization on the audit quality and earnings quality. It examines the relation between industry specialization and earnings quality, financial reporting quality, and audit quality. The research posits that industry specialization constrains earnings management. In addition, it hypothesized a positive relationship between industry specialization and financial reporting quality. An experiment was conducted in an audit firm with international affiliation in Egypt to test the research hypotheses. The results indicate that there is no significant difference between industry specialist auditors and non-specialists in constraining earnings management. In addition, findings support that financial reporting quality was significantly higher when specialists conducted the audit. The results provide empirical evidence consistent with the hypothesis that auditor industry specialization improves audit quality. Finally, industry specializ...
Modern Management Review
This paper further examines the influence of external auditor and board attributes on incidence of discretionary accruals and real earnings management in Nigeria. The sample size comprises fifty (50) purposively selected quoted non-financial firms for a 7 year period (2014–2020), culminating into a 350 dataset. The descriptive statistics depict absence of both discretionary accruals and real earnings management with either classifications dependent upon the auditor-type, board independence and profitability among quoted non-financial firms in Nigeria. The regression results indicate reduction in discretionary accruals owing to concerted audit efforts and lower board size while large profitable firms still possess the tendencies to use discretionary accruals in manipulating earnings. On real manipulative propensities by management, audit fees contribute greatly while auditor-type and presence of female directors on corporate boards exhibit negative and statistically significant assoc...
Turkish Listed Manufacturing Companies' Audit Structure and Its Effect on Earnings Management
Using a sample of 1,333 firm*year observations for the period between 2005 and 2013, this research focuses on Turkish listed manufacturing companies' audit structures' effect on their earnings management via accruals and business activities. Audit structure was divided into the internal audit function and audit committee. Provision of the internal audit (a department, parent company, both or outsourced) and audit committee characteristics (size, independence and meeting frequency) are the independent variables of this research and the earnings management is the dependent variable which was calculated as a magnitude for discretionary accruals and manipulation of business activities with Kothari, Leone and Wasley' (2005) and Roychowdhury (2006) respectively. The results revealed that manipulating the business activities are not correlated with neither the internal audit nor the audit committee. Also, internal audit solely provided by the parent company has no effect on the earnings management via discretionary accruals but internal audit department and the department supported by the parent company's internal audit decrease the earnings management via accruals. On the other hand I didn't find any statistical significance on a relationship between audit committee characteristics and discretionary accruals.
Investment Management and Financial Innovations
This research aims to explore new evidence on the nature of the relationship between the effectiveness of audit committee and earnings management in one of the emerging economies, Jordan. In addition, it investigates how external auditor size might moderate this relationship. For this purpose, a panel data consisting of 64 industrial firms listed on Amman Stock Exchange (ASE) is used, covering the period between 2009 and 2014. An index consisting of four characteristics is developed to measure the effectiveness of audit committee, namely audit committee independence, size, meetings and financial expertise. Results show that audit committee effectiveness has a significant and negative impact on earnings management. Moreover, a positive interaction effect of external auditor size and audit committee effectiveness on earnings management is found, which is supportive of the substitute relationship between the external auditor size and effective audit committee in reducing earnings manag...
Academy of Accounting and Financial Studies Journal, 2021
This study presents an evidence on the importance of auditor's reputation, auditor's fee and auditor's scepticism to the quality of auditing earnings management. Using auditors from the Big 4 and non-Big 4 audit firms, a study was conducted to examine whether these characteristics of the auditors influence their audit quality on earnings management. The study was carried out using a questionnaire survey. The findings of the study suggest that auditor's reputation and auditor's fee do not necessary influence the quality of audit on earnings management. Rather, the auditor's scepticism plays an important role in influencing the quality of audit on earnings management. The study implicates that auditors should have greater scepticism to gain better audit quality in auditing earnings management practices. The evidence provided in this study could help enforcement bodies such as SEC in probing companies that manipulate their earnings reflected in their financial statement.
Relationship Between Auditors´Fees and Earnings Management
Revista de Administração de Empresas, 2017
This study investigates the relationship between audit fees and earnings management in the Brazilian market. In response to the research question, we used a sample of 300 firms listed on the BM&FBovespa for which it was possible to identify the amount paid to the auditors, using data gathered from the Economatica® database and the website of the Brazilian Securities Commission (Comissão Brasileira de Valores Mobiliários [CVM]). We analyzed the regressions with the aim of supporting or refuting the hypothesis that audit firms that charge less for their service tend to be more relaxed regarding earnings management by their client companies. The results support this hypothesis. The main contribution of this study is the possibility of stating that more aggressive earnings management occurs predominantly among firms that pay less than expected for audit services. This study evidences the perception of risk by audit firms and how this is reflected in the audit fees charged.