The roles of internal audit quality on the relationship between narcissistic CEOs and real earnings management

2018 ◽  
Vol 13 (01) ◽  
Author(s):  
Jasman Jasman ◽  
◽  
Etty Murwaningsari ◽  
Keyword(s):  
Earnings Management ◽  
Audit Quality ◽  
Internal Audit ◽  
Real Earnings Management ◽  
The Relationship

Audit committee and financial reporting quality: the moderating effect of audit quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sana Mardessi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Moderating Effect ◽  
Real Earnings Management ◽  
Financial Reporting Quality ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this study is to address the impact of audit quality on financial reporting quality proxied by real earnings management. To further clarify the mentioned links, this study empirically assesses the moderating effect of audit quality. Design/methodology/approach The study is based on a sample consisting of 90 non-financial companies that are listed in the Amsterdam stock exchange in AEX all share index over the 2010–2017 period. This study applies a quantitative approach and secondary data as the main source of information for analysis. This paper performs an ordinary least squares regression to examine the moderating effect of audit quality on the relationship between financial reporting quality. Findings Empirical findings demonstrate that corporate governance mechanism, mainly independence members, financial expert and audit committee size has a statistically significant relationship with real earnings management. However, the effect of audit committee meetings on real earnings management is not significant. There is also evidence that audit quality moderates the audit committee – real earnings management links. Originality/value This study extends the existing literature by examining the moderating effect of audit quality on the relationship between financial reporting quality proxied by real earnings management in the Dutch context.

scholarly journals The Relationship between Financing Policy, Earnings Management and Governance Practices

2016 ◽  
Vol 8 (1) ◽  
pp. 230
Author(s):  
Yi-Mien Lin ◽  
Hsiu Fang Chien
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Internal Control ◽  
Audit Quality ◽  
Principal Component ◽  
Price Impact ◽  
Real Earnings Management ◽  
Management Tools ◽  
Financing Policies ◽  
The Relationship

<p>This paper examines the effect of managers manipulated earnings management methods on the firm’s financing policies and investigates the relationship between internal control, audit quality, and earnings management. We adopt the two-stage model to control self-selection of earnings management and the principal component analysis to extract the first principal component as the corporate governance. The findings show that firms choose the earning management tools in advance in year -1. Corporate governance can restrain real earnings management, but the effect decline when firms engaged in financing activities. Only the larger shareholdings of institutional investors and firms audited by industry specialist can restrain real earnings management when firms undertake financing policies. The firms of issuing bonds choose real earnings management to avoid frequent outsider monitoring. And then, it causes operating performance to decline continuously two years after bond financing. Moreover, investors don’t correct the price impact of earlier earnings overstates for SEOs and bonds sample. </p>

scholarly journals The impact of executive compensation and audit quality on accrual-based and real-based earnings management: Evidence from Jordan

2018 ◽  
Vol 15 ◽  
pp. 209-219
Author(s):  
Mohammad M. Alhadab
Keyword(s):  
Earnings Management ◽  
Executive Compensation ◽  
Audit Quality ◽  
Real Earnings Management ◽  
Prior Literature ◽  
Reported Earnings ◽  
The Impact ◽  
New Evidence ◽  
The Relationship

This study investigates the relationship between executive compensation, audit quality, and accrual and real earnings management in Jordan. While prior literature focuses on examining the impact of audit quality on accrual earnings management in Jordan, this study contributes to the literature by investigating the impact of executive compensation on real earnings management activities in Jordan. Further, this study contributes to the literature by investigating the impact of audit quality on real earnings management. By examining a Jordanian sample of 445 firm-year observations over the period from 2000 to 2011, this study presents new evidence that executive compensation is positively associated with accrual earnings management, suggesting that managers engage in accrual earnings management to increase reported earnings and, therefore, increase their pay-performance compensation. Further, the results show that managers who engaged in a higher level of real earnings management (via sales-based manipulation) received a lower level of compensation, suggesting that managers in Jordan are punished for the use of real activities. In terms of audit quality, the results show no evidence that audit quality is associated with accrual and real earnings management in Jordan. This study uses the corrected model of Jones (1991) as suggested by Dechow et al. (1995) is to estimate normal accruals, while the models of Roychowdhury (2006) are used to estimate real earnings management activities.

scholarly journals PENGARUH REAL EARNING MANAGEMENT TERHADAP ARUS KAS OPERASI PERUSAHAAN DENGAN KUALITAS AUDIT SEBAGAI VARIABEL MODERASI (Studi pada Perusahaan Manufaktur yang Terdaftar di BEI)

MODUS ◽  
2016 ◽  
Vol 27 (1) ◽  
pp. 65 ◽  
Author(s):  
Felicianus Adi Nugroho ◽  
Dewi Ratnaningsih
Keyword(s):  
Earnings Management ◽  
Audit Quality ◽  
Stock Exchange ◽  
Predictive Ability ◽  
Real Earnings Management ◽  
Earning Management ◽  
Manufacturing Companies ◽  
Management Actions ◽  
The Relationship

This study aims to determine the efect of real earnings management which is a proxy of earnings management to the predictive ability of fnancial reports through the company’s operating cash fow. Researchers also consider the infuence exerted by the quality of audits of the relationship between real earnings management with the company’s operating cash fow. Samples are manufacturing companies listed in Indonesia Stock Exchange during the period of observation 2010-2012.Berdasarkan criteria previously set contained 249 corporate data used in this study. The results of this study revealed that real earnings management has an infuence on the predictive ability of fnancial statements through operating cash fow. Quality audits can also afect earnings management actions undertaken by the company and consequently also of the operating cash fow of the company. Overall audit quality may afect the actions of earnings management and certainly also the predictive ability of corporate fnancial statements.Keywords: real earnings management, operating cash fow, and audit quality.

scholarly journals Unconditional Accounting Conservatism and Real Earnings Management

2018 ◽  
Vol 9 (2) ◽  
pp. 203 ◽  
Author(s):  
Han Li
Keyword(s):  
Earnings Management ◽  
Internal Control ◽  
Negative Relationship ◽  
Robustness Analysis ◽  
Accounting Conservatism ◽  
Real Earnings Management ◽  
Audit Risk ◽  
Operation Costs ◽  
Abnormal Operation ◽  
The Relationship

This research examines the relationship between unconditional accounting conservatism and real earnings management in China’s corporations. Using the regression models, the real earnings management proxies are found by the abnormal cash flow of operations, the abnormal operation costs and the abnormal discretionary expenses and the aggregated measures. The research sheds light on the negative relationship between unconditional accounting conservatism and real earnings management after controlling internal control quality and audit risk. The results of these inferences remain the same after dealing with the robustness analysis and the endogeneity concerns.

scholarly journals Internal Auditing Quality and Earnings Management: Evidence from Sultanate of Oman

2021 ◽  
Vol 4 (2) ◽  
pp. 115-124
Author(s):  
Hind Juma Alyaarubi ◽  
Dua Said Alkindi ◽  
Essia Ries Ahmed
Keyword(s):  
Earnings Management ◽  
Audit Quality ◽  
Internal Audit ◽  
Secondary Data ◽  
Securities Market ◽  
Internal Auditing ◽  
Sultanate Of Oman ◽  
Listed Firms ◽  
Two Sectors ◽  
Research Show

The main purpose of this research is to determine the link between internal auditing quality and earnings management in Omani companies.  In this research, a sample size of 80 was designated from two sectors (Industrial, and Service) in Muscat Securities Market (MSM) in Sultanate of Oman. The secondary data collected is examined with Smart PLS 3.0. The findings of the research show a positive link between Internal audit quality and earnings management in both sectors (industrial and service). This finding indicates that the increase in audit quality will affect to enhance and improve the earning management in Omani listed firms.

scholarly journals The impact of ownership type on the relationship between corporate governance and earnings management: An empirical study

2019 ◽  
Vol 16 (4) ◽  
pp. 31-44
Author(s):  
Ahmed Boghdady
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flows ◽  
Real Earnings Management ◽  
Ownership Type ◽  
Moderation Effect ◽  
Corporate Governance Mechanisms ◽  
The Impact ◽  
The Relationship ◽  
Privately Owned

This study investigates the effect of ownership type on the relation between corporate governance and earnings management. While previous literature has mainly examined the relationship between corporate governance and both accrual and real earnings management, no study to date, to the researcher’s best knowledge, focused on the moderation effect of ownership type on this relationship. Three proxies for measuring accrual and real earnings management, namely discretionary accruals (DA), abnormal cash flows (ACFO), and abnormal discretionary expenses (ADISX) are employed. Three empirical models (i.e. DA, ACFO, and ADISX) are developed in which the earnings management proxies represent the dependent variables and are tested using a sample of non-financial companies containing state-owned and privately owned companies over the period from 2010 to 2017, with 1030 firm-year observations. The results show a positive relationship between ownership type and both accruals manipulation and sales manipulation. In general, the results suggest that the ownership type moderates the relationship between corporate governance and earnings management. The results suggest also that corporate governance mechanisms may not play an almost the same role in monitoring and mitigating real earnings management (REM) practices as they do for accrual earnings management (AEM) in Egypt. Moreover, no evidence is found supportive of the trade-off effect which means that managers in Egyptian firms use both types of earnings management jointly to reach the target levels of earnings

The Relationship between Aggressive Real Earnings Management and Current and Future Audit Fees

2016 ◽  
Vol 36 (1) ◽  
pp. 85-107 ◽  
Author(s):  
Adam Greiner ◽  
Mark J. Kohlbeck ◽  
Thomas J. Smith
Keyword(s):  
Earnings Management ◽  
Firm Value ◽  
Audit Fees ◽  
Cash Flows ◽  
Data Availability ◽  
Real Earnings Management ◽  
Increased Risk ◽  
Pricing Behavior ◽  
Reported Earnings ◽  
The Relationship

SUMMARY We examine the relationship between aggressive income-increasing real earnings management (REM) and current and future audit fees. Managers pursue REM activities to influence reported earnings and, as a consequence, alter cash flows and sacrifice firm value. We posit that the implications of REM are considered in auditors' assessments of engagement risk related to the client's economic condition and result in higher audit fees. We find that, with the exception of abnormal reductions in SG&A, aggressive income-increasing REM is positively associated with both current and future audit fees. Additional analyses provide evidence consistent with increased effort combined with increased risk contributing to the current pricing effect, with increased business risk primarily driving the future pricing effect. We, therefore, provide evidence that aggressive income-increasing REM activities have a significant influence on auditor pricing behavior, consistent with the audit framework associating engagement risk with audit fees. JEL Classifications: G21; G34; M41. Data Availability: The data in this study are available from public sources indicated in the paper.

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