scholarly journals Audit opinion and earnings management: Empirical evidence from Vietnam

2021 ◽  
Vol 18 (4) ◽  
pp. 131-140
Author(s):  
Thanh Nga Doan ◽  
Thu Trang Ta ◽  
Duc Cuong Pham ◽  
La Soa Nguyen ◽  
Hoai Nam Tran
Keyword(s):  
Earnings Management ◽  
Regression Model ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Audit Opinion ◽  
Big 4 ◽  
Audit Firms ◽  
Emerging Country ◽  
Independent Variable ◽  
Controlling Variables

This paper aims to explore the interaction between earnings management and audit opinions in the context of Vietnam – an emerging country. For this purpose, two regressions were developed with sample consists of 1,294 firm-years in the period from 2018 to 2020. The first regression model uses Audit Opinion as dependent variable, Discretionary Accruals (DA) as independent variable, and other 8 controlling variables. The results demonstrate that the Discretionary Accruals influence audit opinion, significantly at 0.1 level in the study year. This means the auditor’s probability of issuing modified opinion is positively associated with earnings management and with the attendance of a Big 4 audit companies. Another regression model tests influence of auditor size (measured by Opinion of Auditor) on the interaction between management of earnings and audit opinion (measured by Discretionary Accruals) as independent variable, and other 10 controlling variables. Surprisingly, this model is not statistically significant and this confirms that the appearance of a Big 4 audit companies does not significantly affect the nexus between profit management and audit opinion in the case of Vietnamese listed companies. The results suggest that Big 4 audit firms tend to have higher requirements for the true-and-fair information on the client’s financial statements and often have a tendency to issue modified opinions when the financial statements have material errors, or it is impossible to collect sufficient audit evidence. This finding may enhance the decision-making process of users in various circumstances. AcknowledgmentsThis paper is funded by the National Economics University (NEU), Vietnam. The authors thank anonymous reviewers for their contributions and the NEU for supporting this study.

scholarly journals Signing Auditor-Specific Characteristics And Audit Report Lag: A Research From Turkey

2018 ◽  
Vol 34 (2) ◽  
pp. 277-294 ◽  
Author(s):  
Murat Ocak ◽  
Evrim Altuk Ozden
Keyword(s):  
Educational Level ◽  
Financial Statements ◽  
Education Level ◽  
Audit Report ◽  
Firm Age ◽  
Audit Opinion ◽  
Gender And Education ◽  
Big 4 ◽  
Audit Firms ◽  
Positive Effect

The purpose of this paper is to examine the effect of signing auditor-specific characteristics on the audit report lag using 968 firm-year observations from Borsa İstanbul in the period 2008-2013. The main findings indicate that the gender and education level of signing auditor have a positive effect on audit report lag. Also big4 audit firms in Turkey encourage auditees to present financial statements timely and they play a substantial role in the reporting. Audit opinion directly affects audit report lag. Firm performance and firm age inversely affect audit report lag. Moreover, big 4’s female signing auditors lead to more audit delay. The higher educational level of signing auditors leads to more audit report lag. Signing auditors who hold master’s or Ph.D. degrees and also female signing auditors are associated with more audit report lag in firms audited by big4 and non-big4 firms.

Audit Firms as Networks of Offices

2017 ◽  
Vol 37 (3) ◽  
pp. 211-242 ◽  
Author(s):  
Scott E. Seavey ◽  
Michael J Imhof ◽  
Tiffany J. Westfall
Keyword(s):  
Knowledge Management ◽  
Knowledge Sharing ◽  
Network Effects ◽  
Audit Quality ◽  
Discretionary Accruals ◽  
Big 4 ◽  
Audit Firms ◽  
Network Connectedness ◽  
Partner Knowledge ◽  
Office Level

SUMMARY Prior audit research suggests that most, if not all, audit quality can be explained at the office level. However, the question remains of whether office-level audit quality is contingent on how individual offices relate to the firm as a whole. Motivated by theories of knowledge management, organizational learning, and networks, we posit that individual offices are connected to their audit network through partner knowledge sharing and oversight, which impact office-level audit quality. We interview Big 4 audit partners and learn that knowledge sharing between partners in different offices is common and intended to aid in the provision of audit services. Using network connectedness to proxy for knowledge sharing and oversight between offices of the same firm, we document that more connected offices are associated with fewer client restatements and lower discretionary accruals. We additionally find that network effects are magnified when accounting treatments are more complex and require greater auditor judgement.

UKURAN KANTOR AKUNTAN PUBLIK, DISCRETIONARY ACCRUALS DAN OPINI AUDIT GOING CONCERN

2019 ◽  
Vol 15 (1) ◽  
pp. 11
Author(s):  
Ravaela Amba Masiku ◽  
Christine Novita Dewi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Stock Exchange ◽  
Discretionary Accruals ◽  
Audit Firm ◽  
Going Concern ◽  
Discretionary Accrual ◽  
Audit Firms ◽  
Going Concern Opinion ◽  
Positive Effect

The purpose of this study is to examine auditor’s concervatism in term of their reaction to client’s earnings management behavior and their limitations to issue the going concern opinions (GCO). The population of this study consists of 672 observations from 69 companies are listed on the Indonesia Stock Exchange (BEI) during 2012-2017. The author used the modified Jones model to measure discretionary accruals as a proxy of earnings management. The results of this study indicate that size of audit firm has a positive effect to discretionary accrual. Companies that have been audited by the Big4 tend to apply discretionary accrual in their financial reporting than companies audited by Non-Big4. Further, to strenghten the first hypothesis, we examine the effect of discretionary accruals and going concern opinion on companies that audited by audit firms Big4 lower than companies that audited by audit firms Non-Big4. We found that the result is consistent with the first hypothesis. Keywords : auditor reputation, discretionary accruals, going concern opinion, audit firm  ABSTRAK Tujuan dari penelitian ini adalah untuk menguji konservatisme auditor dalam hal reaksi auditor terhadap akrual diskresioner yang dilakukan oleh perusahaan dan keterbatasan auditor untuk menerbitkan opini Going Concern (GC). Populasi penelitian terdiri dari 672 pengamatan dari 69 perusahaan yang terdaftar di Bursa Efek Indonesia (BEI) selama tahun 2012-2017. Penulis menggunakan model modifikasi Jones untuk mengukur akrual diskresioner sebagai proksi manajemen laba. Hasil dari penelitian ini menjelaskan bahwa ukuran kantor akuntan publik berpengaruh positif terhadap akrual diskresioner, hal tersebut diperkuat dengan pengaruh akrual diskresioner dan opini audit going concern yang diaudit oleh kantor akuntan publik Big4 lebih rendah dari perusahaan yang tidak diaudit oleh kantor akuntan publik Non-Big4. Kata kunci : reputasi auditor, akrual diskresioner, opini audit going concern, kantor akuntan publik

scholarly journals Examining the Decision to Opt In versus Opt Out of Section 107 of the JOBS Act of 2012: Determinants and Consequences

2019 ◽  
Vol 8 (2) ◽  
pp. 108
Author(s):  
Jason Bergner ◽  
Marcus R. Brooks ◽  
Binod Guragai
Keyword(s):  
Earnings Management ◽  
Transition Period ◽  
Accounting Standards ◽  
Financial Statements ◽  
Least Square ◽  
Ordinary Least Square ◽  
Big 4 ◽  
Opt Out ◽  
Ordinary Least Square Regression ◽  
Jobs Act

The Jumpstart Our Business Startups Act of 2012 (hereafter, JOBS Act) creates a new category of firms, referred to as “Emerging Growth Companies” (hereafter, EGCs). Section 107 of the JOBS Act, titled “Opt-In Right for EGCs,” gives EGCs the choice to take advantage of an extended transition period for complying with new or revised accounting standards. In other words, an EGC can choose to delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. Using a logistic regression approach with hand-collected data, we examine the underlying firm characteristics associated with EGCs’ choice of opting in or out of the accounting standards exemption, as provided by Section 107 of the JOBS Act. Using additional ordinary least square regression analyses, we further examine whether the choice of opting in or out is associated with earnings management and financial statement restatement behavior. Our results suggest that EGC firms designated as “smaller reporting companies” are more likely to choose to delay the adoption of a new or revised accounting standard (i.e., opt in). Our findings also show that EGCs that employ Big 4 auditors are more likely to opt out. We further find that EGCs that choose to opt out are less likely to engage in earnings management behavior, proxied by the absolute value of abnormal accruals, and are less likely to restate their financial statements. Taken together, our findings suggest that EGCs that choose to opt out of Section 107 produce higher quality financial statements.

scholarly journals The Effect of Earnings Management on Company’s Performance with Audit Quality and Company’s Size as Moderating Variables

Telaah Bisnis ◽  
2019 ◽  
Vol 18 (2) ◽  
pp. 2017
Author(s):  
Aprih Susanto ◽  
Rahmatya Widyaswati
Keyword(s):  
Earnings Management ◽  
Audit Quality ◽  
Corporate Performance ◽  
Stock Exchange ◽  
Financial Statements ◽  
Performance Effect ◽  
Accounting Firm ◽  
Big 4 ◽  
Manufacturing Company ◽  
Negative Effect

Abstract The purpose of this study was to see how the effects of earnings management on the perfor­mance of companies with audit quality and size of the company as a moderating variable. High Quality Audit demonstrated with large or small public accounting firm. The size of the company can be seen from how many assets owned by the company itself. The sample in this study is based on purposive sampling, with specific criteria that a manufacturing company listed on the Stock Exchange during the period 2011-2014 which publishes annual financial statements (annual report) in complete accordance with the measurement variables to be studied in this re­search, manufacturing company whose financial statements are audited by KAP Big 4 and non- Big 4. So in the get the 22 companies audited by the Big 4 accounting firm and the 28 companies audited by KAP Non Big 4. The results of this study variable Profit Management significant negative effect on the performance effect Perusahaan. VariabelCompany’s Size significantly strengthen the positive relationship between Profit Management with Corporate performance. Variable Audit Quality significant positive effect strengthens the relationship between the Profit Management with Corporate Performance.  

scholarly journals Auditor report and earnings management: Evidence from FTSE 350 companies in the UK

2016 ◽  
Vol 6 (4) ◽  
pp. 334-344 ◽  
Author(s):  
Mohammad Alhadab
Keyword(s):  
Earnings Management ◽  
Discretionary Accruals ◽  
Real Earnings Management ◽  
Audit Report ◽  
Audit Firms ◽  
The Uk ◽  
Different Characteristics ◽  
The Relationship

This paper examines the relationship between audit report and real-based and accrual-based earnings management based on a UK sample. Prior research has mostly focused on US data and examined the relationship between auditor report (qualified vs. non-qualified) and earnings management (proxied by discretionary accruals), and found evidence that qualified audit report is positively associated with the level of discretionary accruals. Despite the importance of the role of audit firms to constrain the use of earnings management, there is no research to date has examined the relationship between auditor reports and real earnings management activities based on UK sample. This paper therefore fills this gap in the literature by providing the first evidence for UK FTSE 350 companies that auditor report is positively associated with real and accrual earnings management. The paper also provide evidence that firms received qualified audit report share different characteristics as compared to firms received un-qualified audit report.

Small Audit Firm Membership in Associations, Networks, and Alliances: Implications for Audit Quality and Audit Fees

2015 ◽  
Vol 91 (3) ◽  
pp. 767-792 ◽  
Author(s):  
Kenneth L. Bills ◽  
Lauren M. Cunningham ◽  
Linda A. Myers
Keyword(s):  
Audit Quality ◽  
Matched Control ◽  
Audit Fees ◽  
Discretionary Accruals ◽  
Audit Firm ◽  
Association Member ◽  
Big 4 ◽  
Audit Firms ◽  
Audit Fee ◽  
Control Samples

ABSTRACT In this study, we examine the benefits of membership in an accounting firm association, network, or alliance (collectively referred to as “an association”). Associations provide member accounting firms with numerous benefits, including access to the expertise of professionals from other independent member firms, joint conferences and technical trainings, assistance in dealing with staffing and geographic limitations, and the ability to use the association name in marketing materials. We expect these benefits to result in higher-quality audits and higher audit fees (or audit fee premiums). Using hand-collected data on association membership, we find that association member firms conduct higher-quality audits than nonmember firms, where audit quality is proxied for by fewer Public Company Accounting Oversight Board (PCAOB) inspection deficiencies and fewer financial statement misstatements, as well as less extreme absolute discretionary accruals and lower positive discretionary accruals. We also find that audit fees are higher for clients of member firms than for clients of nonmember firms, suggesting that clients are willing to pay an audit fee premium to engage association member audit firms. Finally, we find that member firm audits are of similar quality to a size-matched sample of Big 4 audits, but member firm clients pay lower fee premiums than do Big 4 clients. Our inferences are robust to the use of company size-matched control samples, audit firm size-matched control samples, propensity score matching, two-stage least squares regression, and to analyses that consider changes in association membership. Our findings should be of interest to regulators because they suggest that association membership assists small audit firms in overcoming barriers to auditing larger audit clients. In addition, our findings should be informative to audit committees when making auditor selection decisions, and to investors and accounting researchers interested in the relation between audit firm type and audit quality.

scholarly journals The Relationship between Supply Chain CPAs, CSR and Discretionary Accruals

2015 ◽  
Vol 9 (1) ◽  
pp. 66
Author(s):  
Li-Lun Liu ◽  
Yu-Ting Huang
Keyword(s):  
Supply Chain ◽  
Discretionary Accruals ◽  
Certified Public Accountants ◽  
Public Response ◽  
Market Participants ◽  
Big 4 ◽  
Audit Firms ◽  
Negative Effect ◽  
Corporate Social ◽  
The Impact

<p>This research explores the corporate social responsibility (CSR) performance of listed companies in Taiwan by looking at how companies meet their CSR obligations and by exploring how employing supply chain certified public accountants (CSRSCPAs) affects the quality of their earnings. However, despite the benefits stemming from enhanced information corroboration and expertise spillover, CSRSCPAs face the challenge of potential information collusion. It finds that the CSRSCPA has a negative effect on discretionary accruals. Hence, this study looks at supply chain CPAs in the context of the company’s CSR performance to find out the impact of the company’s financial statements. In addition, the results of this study indicate that both a positive earnings quality and a positive public response ensue when the Big 4 audit firms audit CSR companies. Our results show that market participants highly value Big 4 supply chain CPAs with industry experience and that these impressions extend to their evaluation of clients. The inclusion of different supply chain streams reveal that upstream CSRSCPA are more likely than middlestream and downstream CSRSCPA to receive favorable reactions from market participants. This is an indication that market participants are impressed by the specific expertise and knowledge of these professionals.</p>

The Likelihood of Forced Financial Restatement: The Case of Malaysia

2020 ◽  
Vol 11 (1) ◽  
pp. 144-144
Author(s):  
Intan Waheedah Othman ◽  
Richard Slack ◽  
Rebecca Stratling
Keyword(s):  
Decision Making ◽  
Earnings Management ◽  
Financial Reporting ◽  
Financial Statements ◽  
Developed Countries ◽  
Warning Signals ◽  
Foreign Investments ◽  
Financial Restatement ◽  
Emerging Country

Forced restatement is the corrections made to published financial statements as prompted by the auditors or regulators due to non-compliance with the Generally Accepted Accounting Practices (GAAP) (Palmrose and Scholz, 2004). Forced restatements that are due to aggressive financial irregularities, lead to the impairment of investors' confidence on the quality of financial reporting, increase investors' concerns on managerial opportunistic decision-making, and cause substantial losses to shareholders. Forced restatement creates great concern, not only in developed countries, but also in developing countries, thus threatening local and foreign investments in these markets. The effort to determine early warning signals of firms that warrant investigation, specifically in the emerging country of Malaysia remain significant. The review from this study would be beneficial to the auditors and regulators to intervene earlier in terms of formulating plans and strategies to minimize aggressive managerial behaviour, and investors, customers, and suppliers to identify and avoid firms at risk of requiring a forced restatement. Keywords: Forced restatement, earnings management, corporate governance, Malaysia.

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