scholarly journals The Influence of Audit Opinion on the Degree of Real Earnings Management. The Case of Romanian Listed Companies

2019 ◽  
Vol 17 (156) ◽  
pp. 666-679 ◽  
Author(s):  
Mihai CARP ◽  
◽  
Iuliana Eugenia GEORGESCU ◽  
Keyword(s):  
Earnings Management ◽  
Listed Companies ◽  
Real Earnings Management ◽  
Audit Opinion

Auditors' Responses to Classification Shifting: Evidence from U.S. Firms

2021 ◽  
Author(s):  
Mai Dao ◽  
Hongkang Xu ◽  
Trung Pham
Keyword(s):  
Earnings Management ◽  
Audit Fees ◽  
Real Earnings Management ◽  
Audit Report ◽  
Audit Opinion ◽  
Income Statement ◽  
Financial Restatements ◽  
Classification Shifting ◽  
Financial Misstatements

This study examines how auditors react to clients' engagement in classification shifting which refers to the intentional misallocation of line items within the income statement. We find that classification shifting is positively associated with audit fees, audit report lags, the issuance of a modified audit opinion, and auditor resignations. Additional analyses show that auditors' responses to multiple-year classification shifting are similar to our main findings. We further find that classification shifting is associated with a higher likelihood of financial misstatements in the classification shifting year, and future announcements of financial restatements. We also find that the probability of future restatements is even higher when audit clients engage in both classification shifting and real earnings management. Overall, our results imply that auditors become more cautious in response to audit clients' classification shifting behavior.

scholarly journals Earnings Management and Audit Opinion

2016 ◽  
Vol 8 (4) ◽  
pp. 113
Author(s):  
Elaheh Moazedi ◽  
Ehsan Khansalar
Keyword(s):  
Earnings Management ◽  
Income Smoothing ◽  
Real Earnings Management ◽  
Control Variables ◽  
Main Hypothesis ◽  
Audit Opinion ◽  
Discretionary Accrual ◽  
Time Period ◽  
Logistic Regression Method ◽  
The Relationship

The subject of the present research is the study of the relationship between earnings management (accrual-based and real) and auditor’s opinion. Alongside putting the control variables into consideration, this this paper studies the relationship between earnings management (accrual-based and real) and auditors’ opinion. The purpose of this research is to examine the effect of income smoothing and manipulation on the opinion of independent auditors. This research includes two independent variables i.e. earnings management (based on discretionary accruals) and real earnings management, one dependent variable i.e. auditor’s opinion, along with control variables. In the first main hypothesis the relation between real earnings management and auditor’s opinion is examined; and the second hypothesis involves the association between discretionary accrual-based earnings management and auditor’s opinion. In this research some 117 firms in the time period 2008-2013 are empirically investigated and studied using logistic regression method. In conclusion, the second and third hypotheses are rejected; however examination of the first and fourth hypotheses confirms their significant association with auditor’s opinion.

scholarly journals Impacts of financial distress on real and accrual earnings management

2018 ◽  
Vol 22 (2) ◽  
pp. 222
Author(s):  
Danella Rachel Muljono ◽  
Kim Sung Suk
Keyword(s):  
Earnings Management ◽  
Financial Distress ◽  
Listed Companies ◽  
Production Costs ◽  
The Other ◽  
Real Earnings Management ◽  
Financial Health ◽  
Other Hand ◽  
Management Approaches ◽  
The Impact

This research investigates the impact of financial distress on the magnitude of different earnings management approaches, namely real earnings management and accruals earnings management. This research utilizes a total of 2002 firm-year observations from 259 publicly-listed companies and 20 sub-industries in Indonesia from the year 2005 to 2014. Financial distress causes a significant increase of real earnings management and a significant decrease of accruals earnings management. It means that the healthier the company, the bigger the magnitude of real earnings management that is conducted through managing production costs and discretionary expenses. On the other hand, the lower the financial health of the company, the bigger the magnitude of accruals earnings management that is conducted through managing discretionary component of accruals.

scholarly journals The Empirical Research on the Correlation Between the Internal Control and Earning Management in Private Listed Companies

2021 ◽  
Vol 292 ◽  
pp. 02035
Author(s):  
Sheng-Nan Yan
Keyword(s):  
Control System ◽  
Earnings Management ◽  
Negative Correlation ◽  
Internal Control ◽  
Significant Negative Correlation ◽  
Listed Companies ◽  
Real Earnings Management ◽  
Earning Management ◽  
Internal Control System ◽  
Accrued Earnings

Under the background of industrial innovation, this paper takes the data of private listed companies from 2011 to 2016 as the sample for empirical analysis, and finds that internal control is an important factor in earnings management. There is a significant negative correlation between internal control and accrued earnings management and real earnings management. That is to say, having a good and rigorous internal control system can effectively reduce earnings management. Moreover, compared with earnings management of accounting selective activities, internal control has more restrictive effect on earnings management of real activities.

scholarly journals Detection of real earnings management: The case of Vietnamese listed companies

2016 ◽  
Vol 19 (4) ◽  
pp. 81-93
Author(s):  
Loan Thi Phuong Nguyen ◽  
Thao Minh Nguyen
Keyword(s):  
Earnings Management ◽  
Empirical Result ◽  
Regression Models ◽  
Stock Exchange ◽  
Listed Companies ◽  
Real Earnings Management ◽  
Normal Operating ◽  
Price Discounts ◽  
Using Data

There are a great number of incentives that drive managements to manipulate firms’ profit. Beside exploiting the allowed discretional accrual choices, managers could perform real earnings management by altering the normal operating scale of the companies. This paper examines the three most prevalent means of real earnings management, including (1) boost in sales through price discounts or more lenient credit terms; (2) reduction of discretional expenses and (3) overproduction. The main concentration of the study is the applications of these measures to avoid losses. By using data of 610 listed companies on Ha Noi and Ho Chi Minh Stock Exchange from 2008 to 2015 and verified regression models, the research finds evidence that managers do apply real earnings management to avoid losses. These findings are consistent with other researches’ result. Based on the empirical result, the paper raises recommendations to enhance the profit’s reliability and protect investors.

scholarly journals Earnings Management, Annual Report Patch and Accounting Comparability

2016 ◽  
Vol 11 (10) ◽  
pp. 51
Author(s):  
Zhonghai Yang ◽  
Roger Su ◽  
Shasha Zhou ◽  
Yingmei Li
Keyword(s):  
Earnings Management ◽  
Information Quality ◽  
Annual Report ◽  
Positive Impact ◽  
Accounting Information ◽  
Listed Companies ◽  
Real Earnings Management ◽  
Listed Firms ◽  
Chinese Listed Companies ◽  
Accounting Comparability

Using the Chinese A-share listed firms over the period from 2005 to 2012, this paper examines the relationships between earnings management, annual report patch and accounting comparability. The empirical results indicate that Chinese listed companies tend to release their annual report patch after implementing accrual earnings management, but the Chinese listed companies are not likely to release their annual report patch after implementing real earnings management. Disclosing an annual report patch after implementing earnings management may have a positive impact on accounting comparability. This result indicates that an annual report patch published by sample firms may rectify disclosed errors or earnings management of a previous annual report, as a result accounting information quality will be improved.

Research on methods of IPO earnings management: case of Guirenniao

2016 ◽  
Vol 7 (4) ◽  
pp. 491-509 ◽  
Author(s):  
Ye Liu ◽  
Changjiang Lyu
Keyword(s):  
Earnings Management ◽  
Initial Public Offerings ◽  
Financial Statements ◽  
Listed Companies ◽  
Cash Flows ◽  
Production Costs ◽  
Real Earnings Management ◽  
Content Type ◽  
Jones Model ◽  
Industry Peers

Purpose The performance of the first batch of listed companies since the restart of new initial public offerings (IPOs) in January 2014 and their accounting information face repeated and volatile questioning from different sides. This paper aims to take Guirenniao (China) Co. Ltd. (GRN for short), one of the first batch of listed companies in 2014 that suffered performance decline, as an example to analyze how it managed earnings before IPO. Design/methodology/approach This paper examines earnings management signs that exist in GRN through analysis of its financial statements compared to those of its industry peers. This paper then uses the modified Jones model to detect its accrual earnings management and build three models, which are abnormal levels of cash flows from operations, abnormal production costs and abnormal discretionary expenses, to detect real earnings management. Findings This paper finds that GRN managed earnings through accrual and real activities in 2012 and 2013. Finally, this paper provides evidence on the specific methods of earnings management, which are easing credit policy to recognize revenue in advance, abnormal expansion, decreasing costs and connected transactions. Originality/value This paper examines earnings management signs exist in GRN through analysis of its financial statements comparing to those of its industry peers. This paper then uses the modified Jones Model to detect its accrual earnings management and build three models which are abnormal levels of cash flows from operations, abnormal production costs and abnormal discretionary expenses to detect real earnings management.

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