Discussion of the Quality of Accruals and Earnings: The Role of Accrual Estimation Errors

McNichols, Maureen F.

doi:10.2308/accr.2002.77.s-1.61

Cited by 1,324 publications

(937 citation statements)

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“…We use three different measures of accounting quality of the restatement-linked test firms (described in detail in the appendices). Follow prior literature on accounting quality, we use AQ, the standard deviation of the residuals in the regression of working capital accruals on cash flows in the contemporaneous period, at one lag period, and at one lead period (Dechow and Dichev 2002;McNichols 2002;Krishnan et al 2008. ) As additional accounting quality measures, we also consider | | DA , the average absolute discretionary accruals in the prior seven years and whether the restatement-linked firm itself subsequently also restated its financial reports.…”

Section: Research Design and Datamentioning

confidence: 99%

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Board Interlocks and Earnings Management Contagion

2010

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We examine whether earnings management spreads from firm to firm via board connections. We find that contagion of accounting quality occurs via directors in interlocking boards with other firms. A firm with director links to firms that restated earnings tends to have poorer accounting quality and higher likelihood of restating its own financial reports. A firm with director links to firms that did not restate earnings tends to have higher accounting quality. This evidence supports the idea that economic behavior such as accruals management spreads through social networks.

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Section: Research Design and Datamentioning

confidence: 99%

“…We compute accruals quality according to prior studies (e.g., Dechow and Dichev 2002;McNichols 2002;Francis et al 2005;Krishnan et al 2008;Doyle et al 2007). …”

Section: Appendix B: Estimation Of Accruals Quality (Aq)mentioning

confidence: 99%

Board Interlocks and Earnings Management Contagion

2010

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“…Earnings quality is a broader term that scientists interpret differently, depending on the specific situation is applied. McNichols [3] described earnings quality as elusive in the sense that extant literature only identifies diverse characteristics associated with it [4]. Dechow et al [5] believed that earnings quality provide more information about the features of a firm's financial performance that are relevant to specific decisions made in the organizations.…”

Section: Introductionmentioning

confidence: 99%

Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks

Olabisi¹,

To²,

To³

2017

Int J Account Res

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IntroductionIn recent times, the call for reliable financial reporting has gained prominence in Nigeria and global economy at large. The capability or incapability of banks to effectively fulfill intermediate mandate has been the crux of many financial crises. Mediating between the surplus and deficit units within the economy expedites distribution of national savings, thereby improving investments and national output. In 2005, the Central Bank of Nigeria mandated every Nigerian bank to increase capital base from 2 billion naira to 25 Billion Naira in order to enhance competitiveness in the international market. Noteworthy capital market expectations were raised and banks were under pressure to achieve survival and generate higher returns to shareholders. This pressure from the Central Bank of Nigeria has occasioned banks falsifying accounts, inflating earnings and capital. The need for reliable reports has led to statutory audit that provides independent authentication of financial statements prepared by banks' directors.Auditors are instructed to report financial misdemeanors in company's accounts to increase transparency and accountability through fraud detection. Earnings are made up of accruals and cash items and accruals are basically controlled by company's stewards. Management can bloat performance of company and future earnings predictions through manipulation of accruals resulting in earnings management. Financial reports contain accounting information which different users use to appraise firm's performance. Investors use cash flow statement to make investment decisions thereby creating room for highly motivated and intelligent management teams to manipulate the real economic operations to influence the true picture of a company's cash flow from operations. Since accrual accounting measures the performance of company by recognizing economic events irrespective of when transactions occur. Earnings management is therefore, discovered by conducting tests on the components of accrual assumed to be at the managerial discretionary accruals thereby revealing information asymmetries. Accounting scandals experienced in the last few years have affected the regulators' trust of financial statements. This scandal and its consequent results are reasons for drawing attention to quality and reliability of financial statements in the banking sector. Therefore, the absence of investors' confidence in the reported earnings influence the financial market because investors are major players in ensuring availability of capital to support the economic system. Given the above state, this study seeks to assess the effect of audit quality on earnings management in Nigerian listed deposit money banks. The broad objective of this study is to identify relationship between audit quality and earnings management of Nigerian listed money deposit banks while to assess relationship among joint audit, auditor specialization, auditor independence and audit tenure on the earnings management in the listed deposit money banks in Nigeria wo...

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“…Söz konusu ilişkinin incelenmesi için literatürde mevcut yöntemlerden yararlanılmıştır. Bu kapsamda yaygın olarak kullanılan ve kâr yönetimini farklı varsayım ve bakış açılarıyla tahmin eden dört farklı kâr yönetimi modeli kullanılmıştır (Dechow & Dichev, 2002;Dechow vd., 1995;McNichols, 2002;Stubben, 2010). Kullanıla n modeller vasıtasıyla elde edilen kâr yönetimi metrik değerleri ve firma yönetim kurulu arasındaki ilişkinin incelenmesinde de yine literatürde kullanılan modellerden yararlanılmıştır (Peni & Vähämaa, 2010).…”

Section: Veri̇ Yöntem Ve Bulgularunclassified