The impact of audit quality on earnings rounding-up behaviour: some UK evidence

Tom Van Caneghem

European Accounting Review, 2004, vol. 13, issue 4, 771-786

Abstract: Previous studies (see, for example, Carslaw, 1988; Thomas, 1989; Niskanen and Keloharju, 2000; Kinnunen and Koskela, 2002; Van Caneghem, 2002) clearly suggest that public companies' managers tend to round up the first digit of reported earnings (i.e. for companies reporting profits). Based on a sample of listed UK companies and employing earnings rounding-up behaviour (henceforth ERUB) as an indication of earnings management, I attempt to determine the impact of differences in audit quality on earnings management. When I rely on the very popular brand-name proxy (i.e. BigFive versus non-BigFive auditors) to capture differences in audit quality, findings are inconsistent with BigFive auditors constraining earnings management practices (i.e. findings suggest ERUB for both BigFive and non-BigFive clients). Employing an alternative proxy (i.e. based on auditors' industry expertise), findings are only weakly consistent with specialist BigFive auditors constraining earnings management (i.e. ERUB) practices.

Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/0963818042000216866 (text/html)
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:taf:euract:v:13:y:2004:i:4:p:771-786

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/REAR20

DOI: 10.1080/0963818042000216866

Access Statistics for this article

European Accounting Review is currently edited by Laurence van Lent

More articles in European Accounting Review from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().