Is There a Trade-Off Between Accrual-Based and Real Earnings Management Activities in the Presence of (fe) Male Auditors?

Andrews Owusu (), Alaa Mansour Zalata, Kamil Omoteso and Ahmed A. Elamer
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Andrews Owusu: Coventry University
Alaa Mansour Zalata: University of Southampton
Kamil Omoteso: University of Derby
Ahmed A. Elamer: Mansoura University

Journal of Business Ethics, 2022, vol. 175, issue 4, No 9, 815-836

Abstract: Abstract Prior research suggests that the presence of high-quality auditors (i.e. proxied by audit firm characteristics) constrains accrual-based earnings management, but it inadvertently leads to higher real activities manipulation. We investigate whether such trade-off exists between accrual-based and real earnings management activities in the presence of female or male auditors. We use a sample of UK firms for the period 2009 to 2016 and find that firms audited by female auditors do not resort to a higher-level real activities manipulation when their ability to engage in accruals management is constrained. Overall, our results suggest that the benefits of hiring female auditors (i.e. less accrual-based earnings management) are overwhelmingly higher than the costs they might bring to the client firms (i.e. higher real activities manipulation).

Keywords: Auditor gender; Abnormal accruals; Real activities (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10551-020-04672-5

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