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The impact of audit independence on real- and accrual-based earnings management: Evidence of listed companies in a Swedish setting
Jönköping University, Jönköping International Business School.
Jönköping University, Jönköping International Business School.
2018 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

Earnings management has been an accounting issue for decades and continues to concern accounting profession, regulators and standard setters. Auditors has an impact on managers' behaviour of earnings management activities. Higher audit independence implies higher reporting quality and decreases the likelihood of managers to manipulate earnings. Because of the increased interest of earnings management activities and auditors' role in society, the purpose of the study was to investigate whether audit independence can decrease the use of real- and accrual-based earnings management. Accrual-based earnings management refers to manipulation based on accounting standards such as methods for measuring depreciation and inventory, and the choice between different accounting principles. Real earnings management refers to manipulation in a firm's business activities, such as timing of sales and overproduction of goods. The study investigated 98 companies during the time-period 2009-2016, which yield in a total of 784 firm-years observations. The study used the modified Jones model augment by Kim, Parker and Wier (2012) and the model by Roychowdhury (2006) to estimate accrual-based and real earnings management, which serves as proxies of earnings management. Non-audit services, client importance, key audit partner tenure and company size were used as proxies of audit independence. The study provides evidence that non-audit services and company size are accurate proxy for audit independence and have significant impact on earnings management. The study can draw the conclusion that audit has an impact on earnings management even though audit independence might not be the fundamental factor.

Place, publisher, year, edition, pages
2018. , p. 49
National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-39644ISRN: JU-IHH-FÖA-2-20180560OAI: oai:DiVA.org:hj-39644DiVA, id: diva2:1211831
Subject / course
IHH, Business Administration
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Available from: 2018-05-31 Created: 2018-05-31 Last updated: 2018-05-31Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
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Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
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Output format
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  • asciidoc
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