Earnings management and the audit opinion: evidence from Malaysia

Shireenjit Johl, Christine A. Jubb and Keith A. Houghton

Managerial Auditing Journal, 2007, vol. 22, issue 7, 688-715

Abstract: Purpose - This study aims to examine auditor reporting behaviour in the presence of aggressive earnings management (EM) in the context of the Asian Economic Crisis as it affected Malaysia. In the vein of Bartov, Gul and Tsui, the interaction between discretionary or abnormal accruals and audit quality (AQ), as indicated by auditor size and auditor industry specialisation, is examined. Design/methodology/approach - A logistic regression model adapted from various prior studies is utilised to test the hypotheses. Findings - As per earlier findings using Western data, Big 5 auditors in Malaysia appear to qualify more frequently than their non‐Big 5 counterparts when high levels of abnormal accruals are present. However, the interaction between auditor industry specialisation and abnormal accruals is not significant in predicting the incidence of qualification. Originality/value - This study extends the current literature on AQ differentiation and specifically it attempts to address the gaps in the literature with respect to auditor reporting behaviour in the presence of aggressive EM. In addition, this study provides additional evidence on Big 5/industry specialist quality differentiation in an emerging market (an under‐researched area), Malaysia, arguably with less transparent and weaker governance structures than the developed economies such as the USA, UK, and Australia.

Keywords: Auditing; Earnings; Malaysia; Quality (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:02686900710772591

DOI: 10.1108/02686900710772591

Access Statistics for this article

Managerial Auditing Journal is currently edited by Professor Jie Zhou

More articles in Managerial Auditing Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().