Internal audit role on information asymmetry and real earnings management

Purpose This study aims to investigate the monitoring role of internal audit function (IAF) on real earnings management (REM) practices. It examines the effect of investment in IAF (IIAF) and IAF sourcing arrangements on REM, unlike prior literature which has mainly examined the effects of IIAF on accrual-based earnings management. Design/methodology/approach This study uses a sample of 1,056 observations from an emerging market, Malaysia, between 2013 and 2016. Feasible generalised least square (FGLS) regression is used to analyse the data. To corroborate the results of this study, the authors use an ordinary least square (OLS) regression model with robust standard errors adjusted and also consider alternative REM measures. Findings The results of this study suggest that IIAF has a significant negative relationship with REM practices. Further, in-house IAF sourcing has a significant negative association with REM. The additional analysis supports the main results confirming the essential role of IAF in reducing REM in the Malaysian market. Practical implications The evidence relates to the important role of IAF in mitigating REM practices. High-quality of IAF impairs managers’ ability to manage earnings in their own interests. The findings may be useful in informing regulators, managers, shareholders and other investors, as well as researchers, about improving the role of IAF. Originality/value This study contributes to the existing literature by providing the first evidence of the significant role of IIAF and IAF sourcing arrangements in mitigating REM in an emerging country.

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DAMPAK PENERAPAN IFRS TERHADAP KUALITAS LAPORAN KEUANGAN DAN ARUS INVESTASI

JRAK Jurnal Riset Akuntansi dan Komputerisasi Akuntansi ◽

10.33558/jrak.v9i1.1362 ◽

2018 ◽

Vol 9 (1) ◽

pp. 49-74

Author(s):

Ari Dewi Cahyati

Keyword(s):

Earnings Management ◽

Information Asymmetry ◽

Linear Regression Analysis ◽

Secondary Data ◽

Real Earnings Management ◽

Accounting Quality ◽

Management Level ◽

Quality Reporting ◽

Negative Effect

Objective of this study is to determine whether IFRS convergence will improve the quality of financial statements as indicated by decreasing levels of information asymmetry and declining real earnings management. IFRS convergence is measured by Dummy variables years before convergence and year after covergency while accounting quality reporting is measured by decreasing earnings management level and decreasing level of information asymmetry. Real earnings management uses abnormal cash flow, abnormal discretionary expense and abnormal production cost (Roydhuchory, 2006) while information asymmetry uses adjusted spreads. While the variable of investment flows is measured by the percentage of foreign investment ownership in Indonesia (defond et.al, 2011). This research uses a quantitative approach that aims to test the theory. The research method used is explanatory research. The sample of this study are all companies listed on BEI. Secondary data research data. From purposive sampling, 102 samples were obtained for IFRS convergence effect on Real earnings management and 100 companies to test the effect of IFRS convergence on asymmetry and information asymmetry on global investment flows. Methods of data analysis using linear regression analysis. The result of statistical analysis shows 1) that IFRS convergence has negative effect on real profit management. This indicates that the higher the IFRS convergence the real earnings management will decrease. 2) IFRS convergence has no effect on information asymmetry and 3) Information asymmetry has no effect on global investment flows in Indonesia.

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Outsourced internal audit function and real earnings management: The role of industry and firm expertise of external providers

International Journal of Auditing ◽

10.1111/ijau.12217 ◽

2021 ◽

Vol 25 (1) ◽

pp. 206-232

Author(s):

Saeed Rabea Baatwah ◽

Waddah Kamal Omer ◽

Khaled Salmen Aljaaidi

Keyword(s):

Earnings Management ◽

Internal Audit ◽

Real Earnings Management ◽

Internal Audit Function

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Real Earnings Management and Information Asymmetry in the Equity Market

European Accounting Review ◽

10.1080/09638180.2016.1261720 ◽

2016 ◽

Vol 27 (2) ◽

pp. 209-235 ◽

Cited By ~ 6

Author(s):

David Abad ◽

M. Fuensanta Cutillas-Gomariz ◽

Juan Pedro Sánchez-Ballesta ◽

José Yagüe

Keyword(s):

Earnings Management ◽

Information Asymmetry ◽

Equity Market ◽

Real Earnings Management

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GOOD CORPORATE GOVERNANCE, CONSERVATISM ACCOUNTING, REAL EARNINGS MANAGEMENT, AND INFORMATION ASYMMETRY ON SHARE RETURN

JIAFE (Jurnal Ilmiah Akuntansi Fakultas Ekonomi) ◽

10.34204/jiafe.v4i1.1073 ◽

2019 ◽

Vol 4 (1) ◽

pp. 9-18

Author(s):

Sugiyanto Sugiyanto ◽

Alexander Candra

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Information Asymmetry ◽

Stock Returns ◽

Stock Return ◽

Real Earnings Management ◽

Manufacturing Companies ◽

Significant Negative Effect ◽

Good Corporate Governance ◽

Negative Effect

This study aims to analyze the influence of accounting conservatism, real earnings management, and information asymmetry on stock returns. This study uses the sample of all manufacturing companies listed on the Indonesia Stock Exchange during the period 2013 to 2015. The total number of companies used as sample research is 44 companies with observations for three years. Pursuant to purposive sampling method, total of research sample is 132 financial reports and annual reports. The results of this study indicate: (1) Good corporate governance has a significant negative effect on stock return with a significance value of 0.002<0.050; (2) Conservatism with accrual-based conservatism proxy has a significant negative effect on stock return with a significance value of 0.032 <0.050; (3) Real earnings management with the proxy of discretionary cash flow has no effect on stock return with a significance value of 0.050; and (4) Information asymmetry with proxy of bid-ask spread has no effect on stock return with significance value of 0.453> 0.05.

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