 Evaluating the effect of industry specialist duration on earnings managementDennis M. Lopez and Jose Jay Vega Advances in accounting, 2019, vol. 45, issue C, - Abstract: This study examines whether auditor industry specialist duration (i.e., the cumulative number of years an audit firm can be deemed an industry specialist) affects earnings management. Using a sample of 17,546 observations during the period of 2006 to 2014, we find that audits performed by firms with longer industry specialist durations are associated with lower levels of earnings management, as proxied by the absolute value of discretionary accruals. This finding enhances the industry specialization literature by showing that, in the long run, specialist auditors constrain the accrual management activities of their clients. However, we also find that audits performed by firms with longer industry specialist durations are associated with greater levels of real earnings management. In turn, this is consistent with real earnings management surfacing as an unintended consequence of specialist auditors being able to better constrain the accrual management activities of their clients (Chi, Lisic, & Pevzner, 2011). Keywords: Auditor tenure; Discretionary accruals; Earnings management; Industry specialist; Real earnings management; Specialist duration; Specialist tenure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:45:y:2019:i:c:2 DOI: 10.1016/j.adiac.2019.02.002 Access Statistics for this article Advances in accounting is currently edited by Dennis Caplan More articles in Advances in accounting from Elsevier |
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