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Do auditors care about real earnings management in their audit fee decisions?
Choi,Ahrum1; Sohn,Byungcherl Charlie2; Yuen,Desmond2
2018-01-10
Source PublicationAsia-Pacific Journal of Accounting and Economics
ISSN21642257 16081625
Volume25Issue:1-2Pages:21-41
AbstractThis study investigates whether auditors incorporate the implications of potential litigation risk arising from their client firms’ using real earnings management (REM) to manage earnings. Using a large sample of US firms, we find that REM is positively related to audit fees and that this relation is incremental over and beyond the effects of accrual-based earnings management and other control variables. We also find that the positive relation between REM and audit fees is stronger for firms with sophisticated investors or higher stock price sensitivity to accounting earnings. Finally, we find that this positive relation is more pronounced for firms with financial constraints where REM is more likely to stem from managerial opportunism and is perceived as riskier by auditors. These findings are robust to endogeneity controls and various sensitivity tests.
Keywordaccrual-based earnings management audit fees Real earnings management
DOI10.1080/16081625.2016.1231580
URLView the original
Language英语
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被引频次[WOS]:5   [WOS记录]     [WOS相关记录]
Document TypeJournal article
专题University of Macau
Corresponding AuthorSohn,Byungcherl Charlie
Affiliation1.Department of Accountancy and Law,School of Business,Hong Kong Baptist University,,Kowloon,Hong Kong
2.Department of Accounting and Information Management,Faculty of Business Administration,University of Macau,,Macao
Corresponding Author AffilicationFaculty of Business Administration
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Choi,Ahrum,Sohn,Byungcherl Charlie,Yuen,Desmond. Do auditors care about real earnings management in their audit fee decisions?[J]. Asia-Pacific Journal of Accounting and Economics,2018,25(1-2):21-41.
APA Choi,Ahrum,Sohn,Byungcherl Charlie,&Yuen,Desmond.(2018).Do auditors care about real earnings management in their audit fee decisions?.Asia-Pacific Journal of Accounting and Economics,25(1-2),21-41.
MLA Choi,Ahrum,et al."Do auditors care about real earnings management in their audit fee decisions?".Asia-Pacific Journal of Accounting and Economics 25.1-2(2018):21-41.
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