2006
DOI: 10.1080/00014788.2006.9730005
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Earnings management within Europe: the effects of member state audit environment, audit firm quality and international capital markets

Abstract: This paper studies earnings management in a European context. More specifically. the effects of three factors on earnings management within Europe are studied: member state audit environment. audit firm quality and presence in international capital markets. The national audit environments within Europe vary strongly in terms of independence rules and auditor liability. Hence, it can be expected that the restrictions imposed by national audit environments on earnings management vary. However, there are two fact… Show more

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Cited by 155 publications
(97 citation statements)
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References 34 publications
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“…Second, although extensive literature is available about audit and price differences between Big 4 and non-Big 4 auditors for listed companies (Becker et al1998;Kim et al 2003;Choi et al 2010), significantly less research has been carried out on privately owned unlisted companies (Maijoor and Vanstraelen 2006;Van Tendeloo and Vanstraelen 2008). In general, empirical evidence from European private firms provides rather weak support for superior quality among Big 4 audit firms.…”
Section: Introductionmentioning
confidence: 91%
“…Second, although extensive literature is available about audit and price differences between Big 4 and non-Big 4 auditors for listed companies (Becker et al1998;Kim et al 2003;Choi et al 2010), significantly less research has been carried out on privately owned unlisted companies (Maijoor and Vanstraelen 2006;Van Tendeloo and Vanstraelen 2008). In general, empirical evidence from European private firms provides rather weak support for superior quality among Big 4 audit firms.…”
Section: Introductionmentioning
confidence: 91%
“…Francis & Yu (1999) find that firms which hire a Big 5 auditors report lower discretionary accruals, consistent with Big Five auditors constraining opportunistic reporting of accruals. Also, Maijoor & Vanstraelen, (2006) find that companies with non-Big 5 auditors (a proxy for lower audit quality) report discretionary accruals that significantly increase income compared to companies with Big 5 auditors. Table 3, 4 also, show results from control variables, firm size as measured by the natural log of total assets has a significant positive effect on earnings management which corroborate the positive accounting theory's claim that large firms face greater scrutiny from investors, and thus more likely to manage earning to satisfy their forecasts.…”
Section: 00mentioning
confidence: 96%
“…Thus, the definition of audit quality consists of two components: the ability to detect misstatements and the willingness to report the misstatements that are uncovered during the course of an audit. Consistent with this definition of audit quality, there is extensive empirical evidence that various proxy variables for audit 9 quality are correlated with the increased trustworthiness of financial reports (Maijoor and Vanstraelen, 2006;Defond and Jiambalvo, 1993;Lin and Hwang, 2010;.…”
Section: Audit Quality Definedmentioning
confidence: 84%
“…Lin and Wang (2010) perform a meta-analysis of a large number of studies of audit quality and reveal a significant negative relationship between levels of earnings management and several proxies for audit quality (cf. Maijoor and Vanstraelen, 2006). stemmed from governance constraints)" (Lin and Liu, 2009, p. 47).…”
Section: The Importance Of Audit Qualitymentioning
confidence: 99%