Audit firm size, public ownership, and firms' discretionary accruals management

Bauwhede, Heidi Vander; Willekens, Marleen; Gaeremynck, Ann

doi:10.1016/s0020-7063(03)00004-9

Cited by 139 publications

(54 citation statements)

References 46 publications

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“…The absence of quality differentiation between audit firms contradicts results from previous studies on U.S. public companies (Becker et al, 1998, Francis et al, 1999DeFond et al, 2002;Li, 2009). However, the results concur with findings conducted on private firms in Belgium (Vander Bauwhede et al, 2003;Vander Bauwhede and Willekens, 2004). A marginally negative association is even found between PERCQUAL and BIG4 in models 4 and 5.…”

Section: Nas and Audit Qualitysupporting

confidence: 90%

Non-audit Services and Audit Quality: Evidence from Private Firms

Svanström

2013

European Accounting Review

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The purpose of this study is to examine the relationship between audit quality in private firms and the provision of non-audit services (NAS) -an issue that has rarely been considered in prior research. The threats to auditor independence are different in private firms compared to public firms. The same is true of the opportunities to use the same knowledge for audit and for NAS. Therefore, the effect of the provision of NAS on audit quality is also likely to be different. In this study, audit quality is measured by discretionary accruals, as well as by managers' perceptions of the extent to which the audit improves accounting quality. The regression analysis is based on 420 surveyed private firms in Sweden and suggests that audit quality is positively associated with NAS in general and accounting services in particular. The findings indicate that the joint provision of audit and NAS do not necessarily result in impaired auditor independence, but rather support the existence of knowledge spillover between the services.

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Section: Nas and Audit Qualitysupporting

confidence: 90%

Non-audit Services and Audit Quality: Evidence from Private Firms

Svanström

2013

European Accounting Review

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“…Of these findings we note that in the industrial Tunisian context, the belonging of an auditor to a "Big 4" allows to restrict a down earnings management. This result, obtained for Tunisian firms, joined these of Becker, DeFond, Jiambalvo, &Subramanyam (1998) obtained for U.S. firms andVander Bauwhede et al (2003) obtained for Belgian firms. Indeed, these authors studied the effect of the auditor reputation measured by their belonging to a "Big 6" (in the past) on the intensity of earnings management as measured by the absolute value of discretionary accruals.…”

Section: The Cross Effect Of the External Audit Quality And The Capitsupporting

confidence: 70%

“…Thus, they find a higher coefficient of results relevance of firms audited by "Big 4" than for customers of none "Big 4". The hypothesis related to the impact of audit quality on earnings management is also tested in the Belgian context (Vander Bauwhede, Willekens, & Gaeremynck, 2003); in Korea (Jeong & Rho, 2004) and in French (Piot & Janin, 2004).…”

Section: External Auditor Reputation and Earnings Managementmentioning

confidence: 99%

External audit quality and ownership structure: interaction and impact on earnings management of industrial and commercial Tunisian sectors

Kouaib

Jarboui

2014

Journal of Economics Finance and Administrative Science

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JEL classification: M42Keywords: External audit quality Ownership structure Discretionary accruals Cross effect a b s t r a c t This article emphasizes the significance of researching the cross effect of using jointly external audit quality and ownership structure over managerial discretion in a largely unexplored, non-Western and emerging context. The analysis is based on a sample of 61 Tunisian firms listed and unlisted on the Tunis Stock Exchange and operating in the industrial and commercial sectors during the period 2007-2011. To provide evidence on this topic, we conduct an empirical examination. First, we examine the effect of external audit quality and ownership structure on the discretionary accruals for the whole sample. We find that only auditor reputation has a negative and significant effect on earnings management. Second, this article provides empirical evidence on the cross effect of external audit quality variables and capital concentration on earnings management. This test suggests that this combination has a negative and significant effect on earnings management in industrial firms but it has a positive and non significant effect in commercial firms. Finally, the third empirical test concerns the combined effect of external audit quality and institutional property on earnings management. We find that the cross effect of this combined relation is negatively and significantly associated with earnings management of industrial firms but it has no significant effect on the earnings management of commercial firms. As for the cross effect of the auditor seniority and the institutional property, it has a positive and a significant effect in the commercial sectors, while, it is positively and non-significantly associated with earnings management of industrial firms. Calidad de la auditoría externa y la estructura propietaria: interacción e impacto sobre la gestión de los ingresos en los sectores industriales y comerciales tunecinosCódigos JEL: M42Palabras clave: Calidad de la auditoría externa Estructura propietaria Gestión de ingresos Acumulado discrecional Efecto cruzado Sectores tunecinos r e s u m e n Este artículo enfatiza la importancia de investigar el efecto cruzado del uso conjunto de la calidad de la auditoría externa y la estructura propietaria sobre el criterio gerencial, en un contexto emergente no occidental y ampliamente inexplorado. El análisis se basa en una muestra de 61 empresas tunecinas y no cotizadas en la bolsa de Túnez, que operan en sectores industriales y comerciales durante el período 2007-2011. Para aportar evidencia sobre esta cuestión, realizamos un examen empírico. Primeramente, examinamos el efecto de la calidad de la auditoría externa y la estructura propietaria sobre el acumulado discrecional de la muestra en su totalidad. Encontramos que únicamente la reputación del auditor tiene un efecto negativo e importante sobre la gestión de los ingresos. En segundo lugar, este artículo aporta evidencia empírica sobre el efecto cruzado de las variables de calidad de la auditoría e...

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“…Arnedo et al, 2007;Leuz et al, 2003;Marques, Lima Rodrigues, & Craig, 2011;Othman & Zeghal, 2006;Vander Bauwhede et al, 2003), our results show that managers of companies near to bankruptcy prefer to increase earnings because firms need to look better than they actually are and avoid and/or postpone the risk of an involvement in a bankruptcy procedure. They would also indicate that, during financial distress situations, managers of non-listed companies operating in a code law setting behave in a similar way as firms do in other contexts, given that our evidence is consistent with Rosner (2003), who reaches the same conclusion using a different methodology with a different institutional setting and sample (USA and public companies).…”

Section: Spanish Journal Of Finance and Accounting 11mentioning

confidence: 75%

“…Ball & Shivakumar, 2005;Beatty & Harris, 1999) and in code law institutional settings (e.g. Arnedo et al, 2007;Vander Bauwhede, Willekens, & Gaeremynck, 2003).…”

Section: Introductionmentioning

confidence: 99%

Earnings management among bankrupt non-listed firms: evidence from Spain

Campa

Miñano

2014

Spanish Journal of Finance and Accounting / Revista Española de

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We analyse whether Spanish non-listed bankrupt firms are more inclined to manage earnings in comparison with their non-bankrupt pairs during the years preceding a legal procedure for bankruptcy. We also investigate the techniques these companies employ to manage earnings and when they start using earnings manipulation practices. Analysing a matched sample of bankrupt and healthy companies, we find that bankrupt firms manage earnings upwards more than their healthy pairs. They achieve that by employing both accrual and real activity manipulation. These two practices start at least three years before the beginning of the bankruptcy procedure, but real activity manipulation stops the year immediately before filing for bankruptcy. Findings also indicate that earnings management tools change based on the industry in which firms operate and the number of years preceding the bankruptcy. This evidence is relevant to governments, monitoring bodies and all those involved in an insolvency procedure.Analizamos si las empresas españolas no cotizadas en concurso de acreedores manipulan más los estados contables en comparación con sus pares no concursadas durante los años anteriores a su entrada en el proceso legal del concurso. También investigamos las técnicas que esas empresas emplean para manipular sus resultados y cuándo empiezan a utilizar dichas prácticas. Utilizando una muestra pareada de empresas en concurso y empresas "sanas", encontramos que aquellas en concurso manipulan al alza sus resultados más que sus pares "sanas". Para manipular el resultado, nuestro estudio demuestra que las empresas utilizan tanto alteraciones en la contabilidad como decisiones operativas, con la finalidad de maximizar el resultado real. Esas dos prácticas comienzan al menos tres años antes de que empiece el concurso de acreedores, mientras que la manipulación de actividades reales finaliza el año inmediatamente anterior a su declaración de concurso. Los resultados también indican que las técnicas de manipulación del resultado dependen del sector en el que operan las empresas y del número de años anteriores al concurso. Esta evidencia es relevante para gobiernos, organismos supervisores y todos aquellos interesados en un proceso de insolvencia.Palabras clave: Manipulación del resultado; Concurso de acreedores; Marco institucional del derecho romano; Empresas no cotizadas; manipulación de actividades reales; manipulación de devengos *Corresponding author.

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Audit firm size, public ownership, and firms' discretionary accruals management

Cited by 139 publications

References 46 publications

Non-audit Services and Audit Quality: Evidence from Private Firms

Non-audit Services and Audit Quality: Evidence from Private Firms

External audit quality and ownership structure: interaction and impact on earnings management of industrial and commercial Tunisian sectors

Earnings management among bankrupt non-listed firms: evidence from Spain

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