Auditor brand name, industry specialisation, and earnings management: evidence from Taiwanese companies

Chen, Ken Y.; Wu, Shan; Zhou, Jian

doi:10.1504/ijaape.2006.010301

Cited by 19 publications

(12 citation statements)

References 36 publications

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“…6. Using Taiwan data, Chin, Lin, and Zhou (2005) and Chen, Wu, and Zhou (2006) also report higher earnings quality for clients of the Big 4 industry experts than that for clients of non-experts. 7.…”

Section: Discussionmentioning

confidence: 97%

“…There is evidence from the United States, Australia, Taiwan, and Hong Kong that a Big 4 audit firm's national industry expertise results in higher fees relative to non-Big 4 audit firms (Craswell, Stokes, and Laughton 1995;DeFond, Francis, and Wong 2000;Chen and Wu 2004;Francis et al 2005). For example, using Taiwan data, Chen, Wu, and Zhou (2006) also find that Big 4 auditors that are firm-level experts charge higher audit fees, and provide higher-quality services. 8.…”

Section: Discussionmentioning

confidence: 98%

“…The extant literature on industry expertise focuses primarily on a sample of clients audited by Big 4 firms (Balsam 2003;Krishnan 2003;Ferguson et al 2003;Francis et al , 2005. Using Taiwan data, Chen et al (2005Chen et al ( , 2006 consistently find that CAR Vol. 26 No.…”

Section: Discussionmentioning

confidence: 99%

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Reducing Restatements with Increased Industry Expertise*

Chin

Chi

2009

Contemporary Accting Res

271

196

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This paper examines whether the likelihood of accounting restatements is associated with Big 4 industry auditor specialists, measured at both the partner level and the audit firm level. We focus on a sample of listed firms in Taiwan, where audit reports must be audited and signed by the two signing auditors as well as by an audit firm. Extending previous studies, we classify industry specialists into three groups: (a) auditors that are industry specialists at both the individual partner level (i.e., the lead signing auditors) and the firm level; (b) auditors that are industry specialists at the individual partner level but not at the firm level; and (c) auditors that are industry specialists at the firm level but not at the individual partner level. The results reveal that clients of signing auditor specialists, either alone or in conjunction with firm-level specialists, are less likely to make accounting restatements relative to those of other auditors. We find no evidence that firm-level auditor specialists alone are associated with a smaller likelihood of accounting restatements. However, a firm-level industry expert does matter where the lead auditor is an expert. The results suggest that differential likelihood of accounting restatements due to Big 4 industry expertise is primarily attributable to the signing partner specialists rather than to auditor specialists at the firm level. We also find that differential restatement likelihood due to signing auditors' expertise is driven by the lead auditor's expertise, rather than by the concurring auditor's expertise

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Section: Discussionmentioning

confidence: 97%

Section: Discussionmentioning

confidence: 98%

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Reducing Restatements with Increased Industry Expertise*

Chin

Chi

2009

Contemporary Accting Res

271

196

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“…In this case, the duration of the audit relationship can have a positive impact on the quality of the accounting earnings of the audited firms. [20,23,[33][34][35].…”

Section: The Reputation Of the Audit Firm And The Quality Of The Accomentioning

confidence: 99%

“…In this case, the duration of the audit relationship can have a positive impact on the quality of the accounting earnings of the audited firms. [20,23,[33][34][35].However, other studies consider a long relationship audit could corrupt the auditors' independence, and thus the existence of a negative relationship between the duration of the audit relationship and audit quality [36]. The most recent work Hamilton et al [37], Reynolds and Francis [8] confirm the negative association between the duration of the audit relationship and the abnormal component of the result.…”

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confidence: 99%

The Impact of the Audit Quality on that of the Earnings Management: Case Study in Tunisia

Affes¹,

Smii²

2016

J Account Mark

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The purpose of this article is to examine the impact of the audit quality on that of the accounting earnings. We chose the accrual quality, the accounting conservatism and the profit relevance as a measure of the quality of the accounting earnings. The empirical study, which was carried out in this article on a sample of 20 Tunisian firms listed on the TSE (Tunisian Stock Exchange) for the period (2005)(2006)(2007)(2008)(2009), confirms the significant impact of the audit quality on that of the accounting earnings. The study results also show that the variables: size of the audit firm, sectorbased specialization of the audit firm, the co-auditing and the size of the audit committee, improve the quality of the accounting earnings.Citation: Affes H, Smii T (2016) The Impact of the Audit Quality on that of the Earnings Management: Case Study in Tunisia. J Account Mark 5: 178. doi:10.4172/2168-9601.1000178 Page 2 The reputation of the audit firm: the reputation of the audit firm is usually the most commonly used indicator empirically to assess the audit quality. However, several studies show that the long-term audit relationship may impair the auditors' independence or inversely improve the auditors' conditions of the work exercise and therefore the quality of the performed audit [22][23][24].The audit committee: the implementation of the audit committee in a company is one of the controlling mechanisms that ensure the relevance and consistency of the accounting policies adopted for the preparation of the financial statements. In this context, the presence of an audit committee within the firm is likely to improve the transparency of the information disclosure and limit the degree of the managers' involvement in the process of the earning management [25,26].The audit fees: the fees received by the auditor were considered by literature as a means to measure the quality of service provided by the auditor. Frankel et al. [27] show that high fees help reduce the audit management result. Indeed, high audit fees may also reflect an increased audit effect and therefore a better audit quality. The Conceptual Framework Sector-based specialization and the quality of accounting earningsSeveral studies show that the auditors who specialize in a well definite industry benefit from specific knowledge. They have the ability to make a good quality service, achieve cost savings on their audit and provide a better audit quality [17,20,21].Thus, Balsam, Krishnan and Yang [18] anticipate a positive and significant relationship between the sector-based specialization of the audit firms and the quality of the accounting earnings. Gul et al. [28] found that sector-based specialization of the audit firms reduces the discretionary accruals and improves the quality of the accounting figures of the firms. In this regard, Carcello and Nagy [23] expect a negative relationship between the auditors' specialization and the reporting of fraudulent financial statements. Hypothesis 1:The quality of the accounting earnings is positively ...

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