Discretionary-accruals models and audit qualifications

Discretionary-accruals models and audit qualifications The primary goal of this study is to evaluate the ability of the Cross-sectional Jones Model and the Cross-sectional Modified Jones Model to detect earnings management vis-à-vis their time-series counterparts by examining the association between discretionary accruals and audit qualifications. These two cross-sectional models have not been formally evaluated by prior research, and their use may offer certain advantages to investors and researchers over their time-series counterparts. A sample of 173 distinct firms with qualified audit reports and a matched-pair control sample with clean audit reports are used. Only the two cross-sectional models are consistently able to detect earnings management. One limitation of this study is that its findings merely indicate the superiority of the cross-sectional models vis-à-vis their time-series counterparts in an audit qualification setting, not validate either the former or the latter. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Discretionary-accruals models and audit qualifications

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Publisher
Elsevier
Copyright
Copyright © 2001 Elsevier Science B.V.
ISSN
0165-4101
D.O.I.
10.1016/S0165-4101(01)00015-5
Publisher site
See Article on Publisher Site

Abstract

The primary goal of this study is to evaluate the ability of the Cross-sectional Jones Model and the Cross-sectional Modified Jones Model to detect earnings management vis-à-vis their time-series counterparts by examining the association between discretionary accruals and audit qualifications. These two cross-sectional models have not been formally evaluated by prior research, and their use may offer certain advantages to investors and researchers over their time-series counterparts. A sample of 173 distinct firms with qualified audit reports and a matched-pair control sample with clean audit reports are used. Only the two cross-sectional models are consistently able to detect earnings management. One limitation of this study is that its findings merely indicate the superiority of the cross-sectional models vis-à-vis their time-series counterparts in an audit qualification setting, not validate either the former or the latter.

Journal

Journal of Accounting and EconomicsElsevier

Published: Dec 1, 2000

References

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