The Impact of Audit Quality on Earnings Management: An Experimental Study with Evidence from IPO

Advances in Mathematical Finance and Applications

مقاله 4، دوره 5، شماره 3، مهر 2020، صفحه 303-317   

نوع مقاله: Research Paper

شناسه دیجیتال (DOI): 10.22034/amfa.2019.579680.1146

نویسندگان

Maryam Akbaryan Fard¹؛ Hamidreza Vakilifard^{* 2}؛ Hashem Nikoumaram³

¹Tehran Sciences and Researches Branch, Islamic Azad University, Tehran, Iran

²Department of Management, Tehran Sciences and Researches Branch, Islamic Azad University, Tehran, Iran

³Department of Accounting Department, Tehran Sciences and Researches Branch, Islamic Azad University, Tehran, Iran

چکیده

According to a method of earnings management activities that administrators can manage reported earnings from the definition of real activity. In particular they can be located across time and activities in a way that accounting period to achieve a certain revenue target. Conservative attitudes of auditors in presenting their views about the independence of the auditor can considered as a remarkable point in the audit function. The Purpose of this study was to investigate the effect of audit quality on earnings management real time IPO companies. For this purpose, the data of 128 companies listed on the Tehran Stock Exchange during the years 2007 to 2017 were evaluated. The results indicated that the audit quality increases in the year of initial public offerings. The results also demonstrated that there is a significant and positive relationship between the audit fees in the year of initial public offerings and the audit fees in the year after the initial public offerings. Also findings of the research show that earnings management through accrual items has a positive and significant relationship with initial stock offerings.

کلیدواژه‌ها

Initial Public Offering؛ Audit Quality؛ Auditor Opinion؛ Earning management؛ Discretionary accruals

مراجع

[1] Alhadab, M.M., Real and Accrual Earnings Management around Initial Public Offerings in Jordan, International Business Research, 2017, 11(1), P. 204-216. Doi:10.5539/ibr.v11n1p204

[2] Alhadab, M.M., Do Nonaudit Service Fees Associate with Accrual Earnings Management during The IPO?, Corporate Ownership and Control, 2015, 12(3), P. 441-453. Doi:10.22495/cocv12i3c4p5

[3] Alzoubi, E.S.S., Audit quality, debt financing, and earnings management: Evidence from Jordan, Journal of International Accounting, Auditing and Taxation, 2018, 30(C), P. 69-84. Doi:10.1016/j.intaccaudtax.2017. 12.001

[4] Balsam, S., Krishnan, G.V., Yang, J.S., Auditor industry specialization and earnings quality, Auditing: a Journal of Practice & Theory, 2003, 22(2), P. 71-97. Doi:10.2308/aud.2003.22.2.71

[5] Bartov, E., Gul, F., Tsui, J.S.L., Discretionary-accruals models and audit qualifications, Journal of Accounting and Economics, 2000, 30(3), P. 421-452 . Doi:10.1177/0148558X11409162

[6] Barizah ,N., baker, A., Rahim, A., Rahman, A ., Rashid, A, Factors influencing – auditor independence, Managerial Auditing Journal, 2005, 20(8), 356–273. Doi: 10.11648/j.jfa.20150303.12

[7] Beatty, R., Ritter, J., Investment banking, reputation, and the underpricing of initial public offerings, Journal of Financial Economics, 1986, 55, P. 213-232 . Doi:10.1016/0304-405X(86)90055-3

[8] Cameran, M., Francis, J. R., Marra, A., Pettinicchio, A. K., Are there adverse consequences of mandatory auditor rotation? Evidence from the Italian experience, Auditing: A Journal of Practice and Theory, 2015, 34(1), P. 1–24.  Doi:10.2308/ajpt-50663

[9] Chu, B., Hsu, Y., Non-audit services and audit quality-the effect of Sarbanes-Oxley Act, Asia Pacific Management Review, 2018, 23(3), P. 201-208. Doi:10.1016/j.apmrv.2017.07.004

[10] Chen, K.Y., Lin, K., Zhou, J., Audit quality and earnings management for Taiwan IPO firms, Managerial Auditing Journal, 2005, 20(1), P. 86-104. Doi:10.1108/02686900510570722

[11] Dechow, P., Hutton, A., Kim, J., Sloan, R., Detecting earnings management: A new approach, Journal of Accounting Research banner, 2012,50(2), P. 275-334 . Doi:10.1111/j.1475-679X.2012.00449.x

[12] Hasan, T., Hadad, M., Ahmed, K., The accuracy of management profit forecasts in IPO prospectuses Evidence from Indonesia, Journal of Accounting in Emerging Economies, 2016, 6(1), P.2-12. Doi:10.1108/JAEE-02-2013-0010

[13] Healy, P., Wahlen, J. M., A review of the earnings management literature and its implications for standard setting, Accounting Horizons, 1999, 13, P. 365-383. Doi:10.2308/acch.1999.13.4.365

[14] Hematfar, K., Soheili, H., An Investigation of Financing Costs Factors on the Auditor's Qualified Report in the Companies Listed in Tehran Stock Exchange, 2017, 2(2), P. 19-28. Doi:10.22034/amfa.2017.531314

 

[15] Izadikhah, M., Saen, RF., Roostaee, R., How to assess sustainability of suppliers in the presence of volume discount and negative data in data envelopment analysis?, Annals of Operations Research, 2018, 269 (1-2), 241-267. Doi: 10.1016/j.eswa.2014.08.019

[16] Khakbazar Foomani, M., Sarlak, A., Investigating the Relationship among Information Asymmetry, Dividend Policy and Ownership Structure, 2018, 3(2), P.69-80. Doi:10.22034/amfa.2018.540832

 

[17] Krishnan, G.V., Audit quality and the pricing of discretionary accruals, Auditing: A Journal of Practice & Theory, 2003, 22(1), P. 26-109. Doi:10.2308/aud.2003.22.1.109

[18] Lee, P.J., Taylor, S.J., Taylor, S.L., Auditor Conservatism and Audit Quality: Evidence from IPO Earnings Forecasts, International Journal of Auditing banner, 2002, 10(3), P.183-199. Doi:10.1111/j.1099-1123.2006.0349.x

[19] Leuz, C., Nanda, D., Wysocki, P.D., Earnings management and investor protection: An international comparison, Journal of Financial Economics, 2013, 69, P. 505-527. Doi:10.1016/S0304-405X(03)00121-1

[20] Maheshwari, Y.,  Agrawal, K., Impact of IPO grading on earnings management, Journal of Financial Reporting and Accounting, 2015, 13(2), P. 142-158. Doi:10.1108/JFRA-05-2013-0036

[21] Parsamehr, H., Kasravi, A., Fazeli, M., Impact of the Management Performance Evaluation Methods on the Data Quality in Accounting, 2017, 2(1), P. 41-53. Doi:10.22034/amfa.2017.529060

 

[22] Rusmin, R., Auditor quality and earnings management: Singaporean evidence, Managerial Auditing Journal, 2010, 25(7), P. 618-638. Doi:10.1108/02686901011061324

[23] Seckler, C., Gronewold, U., Reihlen, M., An error management perspective on audit quality: Toward a multi-level model, Accounting, Organizations and Society, 2017, 62, P. 21-42. Doi:10.1016/j.aos.2017.08.004

[24] Trueman, B., Titman, S., An explanation for accounting income smoothing, Journal of Accounting Research, 1988, 26, P. 127-132. Doi:10.2307/2491184

[25] Van Tendeloo, B., Vanstraelen, A., Earnings Management and Audit Quality in Europe: Evidence from the Private Client Segment Market, European Accounting Review, 2008, 17(3), P. 447-469.

 Doi:10.1080/09638180802016684

[26] Wallace, W.A., The economic role of the audit in free and regulated markets: a look back and a look forward, Research in Accounting Regulation, 2004, 17, P. 267– 298. Doi:10.1016/S1052-0457(04)17012-4

[27] Waresul Karim, A.K.M., Ahmed, K., Hasan, T., Impact of audit quality and ownership structure on the bias and accuracy of earnings forecasts issued in IPO prospectuses Evidence from a frontier market, Studies in Economics and Finance, 2013, 30(4), P. 288-316. Doi:10.1108/SEF-10-2012-0113

[28] Zhou, J., Elder, R., Audit quality and earnings management by seasoned equity offering firms, Asia-Pacific Journal of Accounting & Economics, 2004, 11(2), P. 95-120. Doi:10.1080/16081625.2004.10510638