Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You and Your Team.

Learn More →

Choice of auditors and earnings management during the Asian financial crisis

Choice of auditors and earnings management during the Asian financial crisis Purpose – This study sets out to examine the effect of the choice of auditors in constraining earnings management within a rule‐based reporting framework during the Asian financial crisis. Design/methodology/approach – Using the iterative seemingly unrelated regression methodology, 383 firm‐observations of service‐oriented listed companies in Singapore are analysed. Findings – The results show that service‐oriented companies engage in income decreasing earnings management during the crisis period. More importantly, the results indicate that only the Big‐6 firms are able to significantly constrain the earnings management of managers of such companies. Practical implications – The ability of Big‐6 firms to constrain earnings management is perceived to add credibility to the quality of reported earnings, and hence contributes to the competitive advantage of the Big‐6 firms in the market for auditing services. Originality/value – The evidence contributes to the literature on corporate governance and the competitiveness of the market for audit services in the context of an economy‐wide financial crisis from an Asian perspective. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Auditing Journal Emerald Publishing

Choice of auditors and earnings management during the Asian financial crisis

Loading next page...
 
/lp/emerald-publishing/choice-of-auditors-and-earnings-management-during-the-asian-financial-4m1odDa5lu
Publisher
Emerald Publishing
Copyright
Copyright © 2007 Emerald Group Publishing Limited. All rights reserved.
ISSN
0268-6902
DOI
10.1108/02686900710718672
Publisher site
See Article on Publisher Site

Abstract

Purpose – This study sets out to examine the effect of the choice of auditors in constraining earnings management within a rule‐based reporting framework during the Asian financial crisis. Design/methodology/approach – Using the iterative seemingly unrelated regression methodology, 383 firm‐observations of service‐oriented listed companies in Singapore are analysed. Findings – The results show that service‐oriented companies engage in income decreasing earnings management during the crisis period. More importantly, the results indicate that only the Big‐6 firms are able to significantly constrain the earnings management of managers of such companies. Practical implications – The ability of Big‐6 firms to constrain earnings management is perceived to add credibility to the quality of reported earnings, and hence contributes to the competitive advantage of the Big‐6 firms in the market for auditing services. Originality/value – The evidence contributes to the literature on corporate governance and the competitiveness of the market for audit services in the context of an economy‐wide financial crisis from an Asian perspective.

Journal

Managerial Auditing JournalEmerald Publishing

Published: Jan 9, 2007

Keywords: Auditing; Asian studies; Financial performance; Earnings; Corporate governance

References