The impact of audit quality on earnings management: Evidence from France

Isaac Awuye ()
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Isaac Awuye: CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA - Université Clermont Auvergne

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Abstract: This research investigates the relationship between financial reporting quality and audit quality within the context of French listed companies. The auditor brand name (Big4) is used as a proxy for audit quality and earnings management is ascertained through real and accruals earnings management estimation. Discretionary accruals are estimated using the Jones Model and the Modified Jones Model while real earnings management is estimated through the use of models proposed by Roychowdhury (2006). The results indicate that clients of Big4 audit firms record higher levels of accruals and real earnings management. This assertion could be attributed to the low level of auditor litigation risk in France. This study contributes to the literature by investigating the case for both discretionary accruals and real earnings management in a French environment that has peculiar auditing characteristics.

Keywords: Audit quality; financial reporting quality; earnings management; discretionary accruals; real earnings management (search for similar items in EconPapers)
Date: 2022-01-31
New Economics Papers: this item is included in nep-acc
Note: View the original document on HAL open archive server: https://hal.science/hal-03824396
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Published in Journal of Accounting and Taxation, 2022, 14, pp.52 - 63. ⟨10.5897/jat2021.0514⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03824396

DOI: 10.5897/jat2021.0514

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