Do auditors constrain benchmark beating behavior to a greater extent in the fourth versus interim quarters?

Casey, Ryan; Kaplan, Steven E.; Pinello, Arianna S.

doi:10.1016/j.adiac.2015.04.001

Cited by 3 publications

(2 citation statements)

References 61 publications

(99 reference statements)

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“…Prior research distinguishes between non-Big-4 and Big-4 audit firms arguing the latter to be of a higher quality than the former (Heninger, 2001; Mayhew and Wilkins, 2003). Iatridis (2015) found that the use of a Big 4 auditor reduces earnings manipulation, and, similarly, Casey et al (2015) found that for clients using well-reputed auditors the use of earnings management to beat benchmarks was lessened. This study therefore includes Big-4 as one of the predictors for earnings management behaviour.…”

Section: Methodsmentioning

confidence: 93%

The role of audit quality and culture influence on earnings management in companies with excessive free cash flow

Astami

Rusmin

Hartadi

et al. 2017

IJAIM

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Purpose The purpose of this paper is to examine the effect of culture and audit quality on managers’ decisions regarding accounting accruals. It focuses on companies experiencing excessive free cash flow, as these companies have been associated with an agency problem. Design/methodology/approach This study measures the magnitude of discretionary accruals as a proxy for earnings management using the cross-sectional modified Jones model. Excessive free cash flow is scrutinized by the method used by Chung et al. (2005). Listed companies in nine countries in the Asia-Pacific region are represented in this study. The statistical analyses are used to examine the influence of cultural aspect, the role of external monitoring by high-quality auditors and the earnings management practice in the companies with excessive free-cash-flow. Findings The empirical results presented in this paper provide support for the proposition that managers of companies with excessive free-cash-flow will make investment decisions that are not always in the best interest of the shareholders and use accounting discretion to increase reported earnings. This study provides empirical evidence that these companies have been associated with an agency problem and the role of external auditor persists in a setting, where cultural differences prevail in across countries. Practical implications In cross-border trade and investment, the findings provide the opportunity to exploit a setting, where cultural differences prevail, whereas other potentially influential variables, including the role of external monitoring by high-quality auditors, are relatively constant across countries. Originality/value Previous studies (Leuz et al., 2003; and Enomoto et al., 2015) examine factors influencing earnings management internationally have concentrated on legal institutions and investor protection. Han et al. (2010) completed a cross-country study on the effects of national culture on earnings management. This study focuses on companies across countries experiencing with excessive free cash flow and examines the cultural aspect and the effectiveness of external monitoring by high-quality auditors operating in different countries in mitigating managerial opportunism.

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Section: Methodsmentioning

confidence: 93%

The role of audit quality and culture influence on earnings management in companies with excessive free cash flow

Astami

Rusmin

Hartadi

et al. 2017

IJAIM

View full text Add to dashboard Cite

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“…(Astami et al, 2017) research revealed that several previous studies explain a clear distinguished measurement between Big-4 and non-Big-4 auditors, for example (Persakis and Iatridis, 2016) research concluded that the Big-4 auditors results in reduced earnings manipulation. (Casey et al, 2015) found that companies who use auditors with good reputations can reduce the earnings management done by clients. As stated by (Hu, 2015), one measurement of audit quality is the size of the Public Accounting Firm which conducting the audit.…”

Section: Political Connection = 1 If Exist and 0 If Not Existmentioning

confidence: 99%

Military Background, Political Connection, Audit Quality And Earning Quality

Widodo

Fanani²

2020

Jurnal Akuntansi

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This research is try to determine the effect of military background and political connections on earning quality with audit quality as a mediator. This research uses a quantitative approach using a sample of mining sector company that listing in Indonesia Stock Exchange in the 2017-2018 periods. The conclusion of this research points out that military background has positive effect on audit quality and political connections negatively affect earning quality. While earning quality not effected by the military background, political connections do not effect audit quality, and earnings quality not effected by audit quality. Likewise, for the hypothesis, mediation of the audit quality has no effect on the relationship of military background and political connections to earnings quality.

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Asymmetric Monitoring of Quarterly Financial Statements by Big 4 Auditors and the SEC's Timely Review Requirement

Dee

Lulseged

Zhang

2021

Accounting Horizons

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We investigate if Big 4 firms are asymmetrically more effective than non-Big 4 firms in monitoring income-increasing vs. income-decreasing quarterly earnings management. We also study the Securities and Exchange Commission's (SEC) 2000 requirement that audit firm reviews of quarterly financial statements be completed prior to their filing with the SEC ("timely reviews"). We find Big 4 firms are more effective than non-Big 4 firms in curbing income-increasing earnings management around seasoned equity offerings (SEOs), but not income-decreasing earnings management around open market repurchases (OMRs). In the post-2000 period, after the SEC's mandate for timely reviews began, we find income-increasing earnings management around SEOs declined significantly, and this decline is primarily driven by the clients of Big 4 firms. We provide evidence that timely quarterly reviews improve earnings quality, especially when companies have incentives to engage in income-increasing accruals and are reviewed by Big 4 firms.

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Do auditors constrain benchmark beating behavior to a greater extent in the fourth versus interim quarters?

Cited by 3 publications

References 61 publications

The role of audit quality and culture influence on earnings management in companies with excessive free cash flow

The role of audit quality and culture influence on earnings management in companies with excessive free cash flow

Military Background, Political Connection, Audit Quality And Earning Quality

Asymmetric Monitoring of Quarterly Financial Statements by Big 4 Auditors and the SEC's Timely Review Requirement

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