The effect of real earnings management on audit fees in listed companies in Tehran Stock Exchange

Abstract

This paper presents an empirical investigation to study the effect of real earnings management on audit fees in selected firms from Tehran Stock Exchange. The study gathers the necessary information from selected stocks listed in Tehran Stock Exchange. The proposed study uses the information of 63 firms over a four-year period from 2009 to 2012, which leaves us to have 252 data. Using some regression study, The study has confirmed real earnings management influences positively on audit fees in general. In addition, while real earnings management through an increase in sales does not influence on audit fees, the survey has concluded that real earnings management through increase in production costs as well as decrease in discretionary expenditures influences positively on audit fees.

Analysis of the Effect of Earnings Management on Audit Service Fees in Five ASEAN-5 Countries

“…Although these two things are difficult to observe, the cost of audit services is closely related to the proxies of cost drivers: client size, client risk and client complexity (Hay et al, 2006). Total audit service fee paid to auditor is a sensible way of measuring auditor's independence to the client (Chung & Kallapur, 2003;DeAngelo, 1981;Reynolds & Francis, 2000) The relationship between earnings management and audit service fees has been the topic of several studies (Abbott et al, 2006;Alali, 2011;Ghanbari et al, 2014;Gul et al, 2003;Larcker & Richardson, 2004). The relationship between earnings management and audit service fees is an interesting topic to be examined because there is still debate about the accounting profession and the appropriateness of providing audit and non-audit services.…”