The Comparative Study on Non－Audited Company’s Earnings Management between Tax Agent’s Confirmation and Tax Government’s Certification on Financial Statements using Discretionary Accruals

2018 ◽  
Vol 19 (3) ◽  
pp. 185-213
Author(s):  
KwangBok Hue
Keyword(s):  
Comparative Study ◽  
Earnings Management ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
The Comparative Study

scholarly journals Moderating Effect of the 2001-65 Law Relating to Credit Tunisian Institutions on Discretionary Practices

2021 ◽  
Vol 17 (2) ◽  
pp. 54
Author(s):  
Amina Zgarni ◽  
Hassouna Fedhila
Keyword(s):  
Comparative Study ◽  
Earnings Management ◽  
Commercial Banks ◽  
Crucial Role ◽  
Financial Statements ◽  
Moderating Effect ◽  
Regulatory Capital ◽  
Discretionary Behaviors ◽  
Financial Scandals ◽  
Discretionary Behavior

The multitude of financial scandals throughout the last two decades is mainly due to fraud and significant irregularities recorded in the financial statements published following accounting manipulations. The aim of this study is to test the moderating effect of Law 2001-65 relating to credit institutions on discretionary practices within Tunisian banks. Following a comparative study of discretionary practices before the introduction of this law and after its introduction, on a sample of Tunisian commercial banks we have shown the crucial role played by this law in the limitation of discretionary behavior in order to align regulatory capital in relation to the period preceding the promulgation of this law (1990-2000). However, we have shown an increase in these discretionary behaviors for earnings management purposes during the period following the entry into force of this law (2001-2019).

scholarly journals Analisis Manajemen Laba Perbankan Konvensional dan Perbankan Syariah di Bursa Efek Indonesia

2020 ◽  
Vol 3 (1) ◽  
pp. 93
Author(s):  
Esty Apridasari
Keyword(s):  
Earnings Management ◽  
Agency Theory ◽  
Conflicts Of Interest ◽  
Stock Exchange ◽  
Financial Statements ◽  
Descriptive Study ◽  
Discretionary Accruals ◽  
Islamic Banks ◽  
Absolute Value ◽  
Conventional Banks

<p class="bdabstract">Earnings management in financial statements can be caused by accrual accounting policies applied and conflicts of interest in agency theory. This study aims to analyze and compare earnings management in financial statements of conventional banks and Islamic banks. This research is a descriptive study of banks listed on the Indonesia Stock Exchange in 2017-2018. Earnings management is measured by accrual earnings management proxied by discretionary accruals using the modified-Jones model. The samples are 10 Islamic banks and 32 conventional banks. The results show that the comparison of the average absolute value of discretionary accruals for conventional banks is 0.0659 and for Islamic banks is 0.0478. It shows that discretionary accruals for Islamic banks are generally smaller compared to conventional banks. This indicates that the level of earnings management in Islamic bank financial statements is lower than conventional banks.</p>

scholarly journals PENGARUH MANAJEMEN LABA DAN CORPORATE GOVERNANCE TERHADAP KECURANGAN LAPORAN KEUANGAN

2020 ◽  
Vol 15 (1) ◽  
Author(s):  
Alam Ashari Kurniawan ◽  
Linda Y. Hutadjulu ◽  
Aaron M. A Simanjuntak
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Sampling Method ◽  
Stock Exchange ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Audit Committees ◽  
Managerial Ownership ◽  
Fraudulent Financial Statements ◽  
Independent Audit

This study aims to analyze the influence of earnings management and corporate governance on fraudulent financial statements. This research was conducted again to review the influence of earnings management and corporate governance on fraud. The population in this study is amanufacturing company listed on the Indonesian stock exchange. Based on the purposive sampling method obtained by 50 companies. The number ofobservations is 150 observations. The analysis used is logistic regression. The results in this study indicate that earnings management as measured by discretionary accruals and unexpected revenue per employee proves that there is no influence onfraudulent financial statements. Corporate governance as measured by managerial ownership, institutional ownership, board of commissioners, independent commissioners, independent audit committees does not affect on fraudulent financial statements.

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 Deferred tax and earnings management under MASB 25

2011 ◽  
Vol 8 (2) ◽  
pp. 57
Author(s):  
Noor Hasimah M. Yacob ◽  
Nor'azam Mastuki ◽  
Rohaya Md Noor
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Income Taxes ◽  
Management Behavior ◽  
Reporting Standard ◽  
Accounting Standard ◽  
Deferred Tax ◽  
Accounting For Income Taxes

This paper investigates whether Malaysian publicly listed companies in 10 sectors use deferred tax and discretionary accruals as tools to manage earnings in order to meet earning targets: 1) to avoid an earning decline and 2) to avoid a loss. This research examines financial statements prepared during the period 2003 to 2005 when the Malaysian Accounting Standard Board (MASB) 25 Accounting for Income Taxes was in place. This study uses Burgstahler and Dichev's approach to identify earnings management firms. Healy's model and a modified Jones model are also employed to identify and separate accruals. The results show no evidence that deferred tax has been used by firms as a tool to manage earnings during the period of study. The finding suggests that the implementation of the MASB 25 (now known as Financial Reporting Standard (FRS) 112), which is more comprehensive and specific than lAS 12, has reduced the use of deferred tax by firms in managing their earnings. In contrast, the findings of this study provide evidence that firms use discretionary accruals to avoid reporting losses. The results ofthis study may be of use to researchers studying earnings management behavior and for standard setters with regard to establishing and monitoring standards.

scholarly journals Transfer Pricing and Controlled Transactions in Connection with Earnings Management and Tax Avoidance

2021 ◽  
Vol 92 ◽  
pp. 02031
Author(s):  
Katarina Kramarova
Keyword(s):  
Earnings Management ◽  
Income Tax ◽  
Transfer Pricing ◽  
Tax Avoidance ◽  
Value Added ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Detection Capability ◽  
Related Party Transactions ◽  
Business Entities

Research background: The way of pricing intra-group transactions (controlled transactions in the terms of transfer pricing) should be in line with the arm´s length principle, whether we consider nationally or transnationally related business entities. If this is not the case, these operations are a tool for earnings management between the companies. It is known that income tax is perceived by businesses as an unproductive withdrawal of own funds without obvious consideration, and therefore managing economic transactions at the level of related-party entities in order to minimize the tax liability is obvious and even expected. Purpose of the article: The aim of the paper is to find out if controlled transactions are used in connection with earnings management and tax avoidance in the selected Slovak company using proxies, which may carry this detection capability (ratios of related party transactions, book-tax differences ratio, and discretionary accruals ratio). Methods: The analytical part of the paper follows the Slovak transfer pricing legislation in force. Following the existing research studies, we test hypothetical relationship between the indicators of earnings management, related party transactions and tax avoidance by applying correlation analysis. We worked mainly with publicly available data from financial statements and notes to financial statements. Findings & Value added: The results indicate that the company managed earnings rather downwards, since the values of discretionary accruals ratio were negative. On the other side, it was not proven that earnings management was carried out purely with the intention of minimizing tax liability.

Does the IFRS improve earnings quality? A comparison of Turkish GAAP and IFRS

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aydın Karapınar ◽  
Figen Zaif
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Quantitative Research ◽  
Earnings Quality ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Net Income ◽  
Data Set ◽  
Content Type ◽  
Significant Difference

Purpose The purpose of this study is to reveal the effect on earnings quality of switching to International Financial Reporting Standards (IFRS) from Turkish generally accepted accounting principles (GAAP) by comparing two sets of financial statements based on Turkish GAAP and IFRS. Design/methodology/approach This study is based on mathematical modeling. The variables (total assets, net income, total accruals, cash receivables, return on assets and size) in the models are core to the quantitative research that examines the relationship between them. In this study, the total accruals are computed based on the indirect approach, and the prediction error of the model represents discretionary accruals that reflect earnings management. The data set includes financial data prepared under IFRS and Turkish GAAP. The univariate and multivariate analyses are conducted by SPSS. Findings The results of this study indicate that IFRS does not cause any significant differences in total assets, but the net income under IFRS is larger compared to that under the Turkish GAAP. It is also found that while there is no significant difference in total accruals, there is a difference in discretionary accruals. In other words, Turkish firms use income-reducing discretionary accruals when adopting IFRS. Originality/value This study provides more insights into the effect of IFRS on earnings quality. It also provides evidence of the effect of accounting culture on IFRS adoption. As a code-law country in Turkey, publicly traded firms have to prepare financial statements based on both Turkish GAAP, which is rule-based and restricts management decisions with strict rules, and the principle-based IFRS which leaves more room to manipulate. To the authors’ knowledge, this is the first study that reveals the effect of accounting standards on earnings management by comparing two sets of financials of the same period prepared under different standards.

scholarly journals External auditor’s analytical procedures and their impact on discovering material misstatements

2020 ◽  
Vol 71 (3) ◽  
pp. 271-300
Author(s):  
Abdul Razzak Alshehadeh ◽  
Abdallah Atieh
Keyword(s):  
Earnings Management ◽  
Commercial Banks ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Multivariate Linear Regression Model ◽  
Independent Variables ◽  
Study Population ◽  
External Auditor ◽  
Analytical Procedures ◽  
The Impact

This study aims to identify the impact of the external auditor’s analytical procedures on the financial statements and reports for the detection of material misstatements of the Jordanian commercial banks. The impact of independent variables (profitability, liquidity, capital solvency and the employment of funds ratios) on the dependent variable (the detection of material misstatements) was measured. The dependent variable is represented by the earnings management, which is measured by the discretionary accruals. The quantitative standard method was used to analyse the financial statements and analytical procedures; moreover, the Jones Model was used to measure earnings management. Additionally, the multivariate linear regression model was used to test the hypothesis of the study, and to indicate the relationships between the variables. The study population consisted of five Jordanian commercial banks. The data was collected from 2011 to 2017. This study concluded that there is no statistically significant impact of the analytical procedures relating to the ratios of liquidity, profitability, solvency, and employment of funds that the external auditor could undertake to discover material misstatement of the financial statements of Jordanian commercial banks. Finally, the study recommended that auditors should be highly competent and deeply knowledgeable in using the analytical procedures to judge the fairness of financial data and be free of material misstatements.

scholarly journals Influência do refazimento das demonstrações contábeis no gerenciamento de resultados das empresas listadas na BM&FBovespa

2017 ◽  
Vol 16 (1) ◽  
pp. 95-120
Author(s):  
Paulo Roberto da Cunha ◽  
Leonardo Barbi Fernandes ◽  
Cristian Bau Dal Magro
Keyword(s):  
Earnings Management ◽  
Accounting Information ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Management Quality ◽  
Quality Of Accounting Information ◽  
Survey Sample ◽  
Quantitative Nature ◽  
Negative Earnings

A qualidade da informação contábil é essencial para os stakeholders, e a prática de gerenciamento de resultado é uma medida de qualidade da informação. Atrelada a isso, a Comissão de Valores Mobiliários (CVM) solicita a republicação das demonstrações contábeis sempre que julgar necessário. Contudo, no ato da republicação das demonstrações contábeis pode haver diferentes julgamentos em relação às escolhas contábeis por parte dos gestores, ocasionando modificações no nível de gerenciamento de resultados das organizações e assimetria informacional entre o principal e o agente. Desse modo, o objetivo com este estudo foi verificar a influência do refazimento das demonstrações contábeis no gerenciamento de resultados das empresas listadas na BM&FBovespa. A análise ocorreu no período pré-refazimento, ano do refazimento e pós-refazimento. Realizou-se uma pesquisa descritiva, documental e com abordagem de cunho quantitativo. A amostra da pesquisa foi composta por 18 empresas com refazimento das demonstrações contábeis entre 1995 e 2012, e para fins de comparação foram selecionadas 18 empresas sem refazimento listadas na BM&FBovespa que continham similaridades em relação ao tamanho e ao setor de atuação. Os resultados não revelam diferenças quanto à média dos accruals discricionários entre os períodos pré-refazimento, ano do refazimento e pós-refazimento. Por outro lado, os resultados em comparação com as empresas que não foram obrigadas ao refazimento das demonstrações contábeis revelam que o refazimento influencia o gerenciamento de resultado negativo. Diante das variáveis testadas, verificou-se que o endividamento influencia o gerenciamento de resultado negativo e que o tamanho da empresa influencia o gerenciamento de resultado positivo.Palavras-chave: Refazimento das demonstrações contábeis. Gerenciamento de resultados. Qualidade da informação contábil. Abstract The quality of accounting information is essential for stakeholders and the practice of earnings management is a measure of quality of the information. Coupled to this, the Brazilian Securities Commission (CVM) requests the republication of the financial statements whenever necessary. However, upon republication of the financial statements may be different judgments about the financial choices by managers, resulting in changes in the level of earnings management organizations and informational asymmetry between the principal and the agent. Thus, the objective with this study was to investigate the influence of the restatement of financial statements in earnings management of companies listed on BM&FBovespa. The analysis took place in the pre-restatement period, the year of restatement and post-restatement. We conducted a descriptive, documentary, with quantitative nature approach. The survey sample consisted of 18 companies with restatement of financial statements from 1995 to 2012 and for comparison 18 companies without restatement listed on BM&FBovespa containing similarities in the size and sector of activity were selected. The results did not reveal differences from the average of discretionary accruals between the periods of pre-restatement, year of restatement and post-restatement. On the other hand, the results compared to companies that were not required to restate the financial statements reveal that the restatement influences the negative earnings management. Before the variables tested, it was found that the debt influences the negative earnings management and company size influences the positive earnings management.Keywords: Restatement of financial statements. Earnings management. Quality of accounting information.

scholarly journals MANAJEMEN LABA BERBASIS AKRUAL DAN RIIL SEBELUM DAN SETELAH KONVERGENSI IFRS PADA PERUSAHAAN MANUFAKTUR TERDAFTAR DI BEI

InFestasi ◽  
2016 ◽  
Vol 12 (1) ◽  
pp. 36
Author(s):  
Ni Made Putri Utami ◽  
Endar Pituringsih ◽  
Biana Adha Inapty
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Sampling Method ◽  
Management Practices ◽  
Financial Statements ◽  
Discretionary Accruals ◽  
Production Costs ◽  
Real Earnings Management ◽  
Manufacturing Companies ◽  
Before And After

<p class="Bodytext70">This study aims to provide empirical evidence on earnings management practices on manufacturing companies listed in Indonesian Stock Market before and after IFRS convergence (2007-2011). Accrual earnings management (the level of discretionary accruals) and real earnings management (abnormal cash flow from operation, abnormal production costs, and abnormal discretionary expenses) are observed to analyze earnings management practices. Data was retrieved using the purposive sampling method and tested with paired sample t-test and correlation test. The results empirically showed that there was no difference between accrual earnings management before and after the IFRS convergence. Additionally, real earnings management also showed that there was no difference between before and after the IFRS convergence. Other results also showed that there was no relationship between management interchangeable accrual earnings and real earnings management after convergence of IFRS. The implications of this research provided information to the users of financial statements, especially shareholders and investors to increase the awareness of the opportunities of accrual earnings management and real earnings management through manipulation of the cash flow, sales and production cost by management.</p>

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