THE EFFECT OF AUDIT QUALITY AND ACCOUNTING VALUES ON EARNINGS MANAGEMENT
DOI:
https://doi.org/10.22561/cvr.v33i1.6349Palavras-chave:
Audit quality, Accounting values, Earnings management, Discretionary accrualsResumo
Considering that national culture affects the country institutions and, indirectly, transaction costs, accounting records and audit quality, the purpose of this study was to evaluate the moderate effect of accounting value on the relationship between audit quality and earnings management in a sample of 45,216 firms (374,690 observations) from 83 countries, covering the period 2002-2017. Audit quality (auditor reputation and auditor industry specialization) was measured as proposed by Francis and Wang (2008), accounting values (professionalism vs. statutory control, uniformity vs. flexibility, conservatism vs. optimism, and secrecy vs. transparency) were categorized as in Braun and Rodriguez Jr. (2008) and earnings management was quantified with the modified model of Jones (Dechow, Sloan, and Sweeney, 1995). Auditing by highly reputed audit firms (Big 4) was found to inhibit earnings management. Moreover, the interaction between audit quality and accounting values suggests that the positive effect of audit quality on earnings quality is stronger the higher the country level of professionalism, flexibility, optimism and transparency. Our results confirm that institutional factors, represented in this study by accounting values, are indeed relevant to earnings and audit quality.
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