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Many firms engage in corporate social responsibility (CSR) initiatives, which aim to serve a broader set of stakeholders (e.g., workforce, communities, environment). These companies often encourage management to consider these stakeholders when making operational and financial decisions. One such decision that managers face involves managing earnings. We conduct an experiment in which experienced managers are placed in the role of a division manager facing an accrual decision. We find that a company's demonstrated commitment to CSR moderates both upward and downward earnings management attempts. We propose, and find support for, a moderated-mediation model in which the firm's commitment to CSR influences managers' consideration of constituents. Managers' consideration of these stakeholders differentially affects the level of accruals, depending on the direction of the earnings management incentive. Our results provide insight into how CSR may influence individuals' decisions within the organization, minimizing the impact that incentives have on maximizing one's self-interest. [ABSTRACT FROM AUTHOR]

We examine whether employees of the Public Company Accounting Oversight Board (PCAOB) that are hired by large audit firms are associated with subsequent higher audit quality at these firms. Employees at the PCAOB acquire expertise related to the industry they regulate, the audit industry. We predict that this expertise, which we label "regulatory audit quality expertise," would improve audit quality at audit firms, particularly for clients with high misstatement risk. We find that regulatory audit quality expertise is associated with fewer client restatements, which are ex post indicators of high misstatement risk not properly addressed by the auditor (i.e., egregious audit quality issues). Further, along the continuum of audit quality, regulatory audit quality expertise is associated, for high risk clients, with audit quality improvements reflected in lower discretionary accruals and more accurate internal control audit opinions. Our results provide some evidence that regulatory audit quality expertise provided by former PCAOB employees is beneficial for audit quality. [ABSTRACT FROM AUTHOR]

Purpose – The present research conducts a thorough review of published literature relevant to earnings management (EM) practices in family firms (FFs), utilizing the Scopus database, intending to identify potential directions for future research. Design/methodology/approach – Through a systematic review, this study focuses on identifying and summarizing trends in publications over the years, the journal outlets, geographical contexts, research methodologies, the temporal evolution of theories and the specific constructs under investigation. Findings – Earlier empirical studies suggest that corporate governance enhances integrity and transparency in FFs, thereby reducing EM practices. Contrarily, compliance with International Financial Reporting Standards (IFRS) seems to offer managers more opportunities for convenient EM rather than restricting such practices. Notably, corporate social responsibility (CSR) practices do not appear to mitigate EM practices consistently. The literature, however, reveals inclusive results and areas requiring deeper exploration for more definitive results. For instance, certain corporate governance mechanisms, such as family-specific social and cultural business characteristics, subjective measures of family businesses, behavioral approaches to family owners' decision-making and directors' personal, psychological and social factors, remain largely untested. Additionally, there is a notable research gap concerning the relationship between IFRS, capital structure and EM. Originality/value – This study’s contributions lie in its comprehensive literature review, identification of research trends and gaps, and its potential to guide future research endeavors in the domain of EM practices in FFs.

Purpose This research aims to identify how corporate governance techniques influence the development levels in Pakistan's life insurance sector. A key focus of the study is the interplay between the development and expansion of the life insurance business and the principles of corporate governance. Methodology This is a quantitative study. Data was gathered from Pakistani insurance firms using a cross-sectional survey with a sample size of 400 respondents. Structural Equation Modeling (SEM) was the primary technique for data analysis. The results suggest that customers, investors, and other stakeholders can develop trust and awareness through effective corporate governance processes. Findings An assessment of the overall fit of the statistical model indicates a good fit, as all metrics fall within acceptable ranges. The regression analysis shows that all independent variables (V1, V2, V3, V4) have a statistically significant relationship with the dependent variable (Banca). The standardized regression weights (SRW) suggest that each variable positively influences the Banca, meaning that as these variables increase, so does the Banca. Conclusion The study concludes that strong corporate governance procedures in insurance companies increase the likelihood of conducting business transparently and ethically, which fosters customer trust and awareness. Additionally, such businesses may improve customer access to insurance products through enhanced risk management and financial stability.

Copyright of Public Money & Management is the property of Routledge and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The purpose of this study is to examine the influences of external auditor firm type, auditor tenure, and external auditor changes on the quality of Saudi Arabian financial reports. In particular, this study examines the quality of financial reports of companies listed on the Saudi Stock Exchange using a widely accepted evaluation model modified by JonesThis study aims to determine whether Big Four and non-Big Four audit firms, auditor tenures of three or more years, and external auditor changes have any impact on the quality of financial reports of Saudi-listed companies. This study uses 175 firm-year observations of 35 companies listed on the Tadawul Saudi Stock Exchange between 2017 and 2021. Using discretionary accruals (DACC) as modified by Jones to measure the quality of financial reports, the findings illustrate that there is a significant negative relationship between Big Four audit firms and DACC. However, the study also shows a significant positive correlation between auditor tenure and DACC. The research revealed that there is no significant relationship between auditor change and DACC. These results have practical implications for policy development. According to the outcomes of this research, there are numerous ramifications for both companies and the government in Saudi Arabia in terms of enhancing the relationship between companies and audit firms and determining the most suitable auditor tenure to improve the quality of financial reports. [ABSTRACT FROM AUTHOR]

This study evaluates the effect of earnings management on earnings quality and sustainability in the GCC region, particularly in distressed and non-distressed companies. Studies on earnings quality and sustainability have mostly concentrated on developed markets, with little attention paid to emerging markets like the GCC region. This research is the first to examine how manipulating earnings impacts the quality and sustainability of earnings in distressed and non-distressed companies. This study utilized a unique dataset that represents the GCC region, which has a specific socio-cultural context. We collected data from 839 publicly listed companies in the GCC region between 2011 and 2022 using DataStream®, WorldScope (WS), and Refinitiv Eikon. To test our hypotheses and ensure accuracy, we used three types of regressions (the fixed effects model, OLS, and 2SLS) and conducted robustness and endogeneity tests. The results of this study indicate that accruals-based earnings management has a negative impact on earnings quality for distressed and non-distressed firms but a positive effect on earnings sustainability for both types of companies. The results of this study also find variations in earnings management practices across industries. These findings provide valuable guidance for auditors, investors, and other stakeholders to evaluate the earnings quality and sustainability of distressed and non-distressed companies, benefiting the GCC economy and similar economies. [ABSTRACT FROM AUTHOR]

The study presents a systematic literature review on earnings management and ethical leadership using the content analysis method. Secondary sources of data from academic journals were utilized to address the issue of earnings management. A total of 112 articles, spanning the period from 1977 to 2022, were examined. The study explores the theoretical aspects of earnings management and the conceptualization and operationalization of ethical leadership. The selected articles underwent a systematic review process, and a content analysis was conducted to provide a structured overview of the existing scholarship in this field. Effective ethical leadership plays a crucial role in overseeing and minimizing manipulated earnings. Therefore, this study contributes to the literature by suggesting ethical leadership as a means to mitigate earnings manipulation. This article is distinguished as one of the pioneering works that provides a thorough analysis of the literature on ethical leadership and earnings management. The findings of this study will be valuable to organizations aiming to reduce earnings management practices and improve the quality of financial reporting. [ABSTRACT FROM AUTHOR]

The research objective is to establish the factors that influence financial reporting quality (FRQ) in agricultural companies in the Republic of Serbia. Based on a sample of 99 large and medium-sized companies in this sector (86.09% of the total population), and following the analysis of 2018-2022 financial statements and auditor's reports, we examine the conditionality of earnings management (EM) as a FRQ determinant at enterprise level. In order to achieve the defined objective, we apply statistical methods, i.e. correlation and multiple linear regression. The research results indicate that more profitable companies have better FRQ, i.e., a higher return on assets, then companies whose financial statements are audited by Big 4 audit firms and companies with low debts. Also, the research results indicate that FRQ of the sampled companies is not affected by their liquidity, board size and audit tenure. [ABSTRACT FROM AUTHOR]

We examine the impact of product recalls on audit production. Product recalls are events that increase engagement risk associated with greater audit effort, and by extension, greater audit quality. Consistent with this conclusion, we find firm-years with a product recall have a lower likelihood of being subsequently restated and lower levels of accrual error. While a positive association generally exists between audit effort and audit fees, prior literature shows firms experiencing economic stress negotiate lower audit fees and auditors accept lower fees to earn future returns. We expect that to increase the likelihood of retaining a client, auditors will agree to lower fees when the short-term economic stress associated with a recall injects downward pressure into fee negotiations. Supporting this conclusion, we find product recalls are associated with lower audit fees – a relation attributable to differing magnitudes of temporal fee increase. We also show the effects are transitory, the higher levels of audit quality are attributable to specialist audit offices, and the lower levels of fees are attributable to engagements where the client has greater bargaining power. While a positive association typically exists between audit effort and audit fees, our paper identifies a firm-specific event that weakens this relation. [ABSTRACT FROM AUTHOR]

Three years after the severe contagious pandemic, Covid-19, hit Europe, its repercussions are still being assessed. This study provides an overview of the Covid-19 pandemic's impact on companies' earnings manipulation activities in Europe. Our results confirm the impact of Covid-19 on earnings management practices in European countries. We confirm that companies reduced their earnings management activities during the pandemic. Moreover, a detailed analysis of the Covid-19 period revealed a higher magnitude of manipulation in 2021 than in 2020. Second, our results confirm the existing differences in earnings management among European countries. Companies from different countries responded differently to the crisis to survive the negative effects of Covid-19. The highest levels of manipulation during the pandemic were observed in France, Germany, and Sweden, whereas the lowest were found in Italy, Austria, and Poland. Third, the complete lockdown in European countries due to the Covid-19 outbreak affected the adequacy of the value of accounting figures. Finally, firms reporting losses had higher levels of earnings management, and listed companies engaged more in earnings manipulation during the Covid-19 period. The development of single-industry towns is one of the most important aspects of improving infrastructure and preventing brain drain as the first priority. [ABSTRACT FROM AUTHOR]

The research objective is to establish the factors that influence financial reporting quality (FRQ) in agricultural companies in the Republic of Serbia. Based on a sample of 99 large and medium-sized companies in this sector (86.09% of the total population), and following the analysis of 2018-2022 financial statements and auditor’s reports, we examine the conditionality of earnings management (EM) as a FRQ determinant at enterprise level. In order to achieve the defined objective, we apply statistical methods, i.e. correlation and multiple linear regression. The research results indicate that more profitable companies have better FRQ, i.e., a higher return on assets, then companies whose financial statements are audited by Big 4 audit firms and companies with low debts. Also, the research results indicate that FRQ of the sampled companies is not affected by their liquidity, board size and audit tenure.

The study explores the relationship between earnings management and value relevance of accounting information of Indian listed firms by investigating three different modes of earnings management – total, short-term and long-term discretionary accruals. Additionally, the study investigates the impact of the converged International Financial Reporting Standards (IFRS), known as Indian Accounting Standards (IndAS), on earnings management which in turn influences value relevance. This study is the first in India to analyse the differential effects of short-term and long-term earnings management on value relevance and to address the endogeneity issue in the price value relevance model through dynamic panel modelling while controlling for the use of the IndAS. The study finds a significant effect of both short-term and long-term accruals management on value relevance and a positive influence of IndAS on the relationship between earnings management and firm value

This study examines the analysts' intentions on predicting the earnings forecasts, whether analysts predict managed or unmanaged earnings or in other words, predict accurate forecast or optimist/pessimist forecasts. This study introduces ex-post forecasts as the better proxy to explain analysts' intentions on earnings forecasts. The important contribution to this line of research is the use of ex-post forecasts in a comparative study of ex-ante and ex-post forecasts. This study covers 3,294 US firm-year observations from 2006 to 2018 and uses various empirical analyses including system GMM to eliminate endogenous effects. Our results suggest that analysts predict the managed earnings to be accurate and to minimize earnings surprises. Results also suggest brokers' actual estimates closely reflect managed earnings and forecast errors from managed earnings are distributed closer to zero than forecast errors from unmanaged earnings. This study provides value to investors in making investment decisions and for policymakers to provide stringent standards to minimize earnings management and any inside trading. [ABSTRACT FROM AUTHOR]

Prior studies on whether information risk is relevant for asset pricing have mixed findings across different countries. This study aims to re-examine this risk in an emerging market such as Vietnam. Using data from two stock exchanges in Vietnam, we investigate (1) if there are evidence of mispricing among accrual quality (AQ) portfolios and (2) whether the AQ factor is useful in explaining the time series portfolio returns. We further examine whether AQ measured by innate accruals and discretionary accruals is a priced risk factor by using the two-stage cross-sectional model suggested by Core et al. (2008). Our findings demonstrate that AQ does explain the time-series variation in returns of 06 size-BM portfolios, and AQ portfolios are overpriced in the Vietnamese stock market. However, we find no evidence that AQ is a priced risk factor in such inefficient Vietnamese. This might be because unprofessional investors are unaware of earnings management embedded in each component of AQ and the lack of transparency in the equity market. [ABSTRACT FROM AUTHOR]

This study examines the relationship between corporate social responsibility (CSR), earnings management (EM), and the characteristics of chief executive officers (CEOs) within the context of China's economic transformation. Drawing on stakeholder theory and upper echelon theory, this study investigates the influence of CSR on EM and the role of CEO characteristics. The empirical analysis is based on a sample of 1,980 Chinese firm‐year observations from the Shenzhen and Shanghai stock markets, between 2013 and 2017. The findings reveal a negative relationship between CSR performance and discretionary accruals (DA), suggesting that higher CSR is associated with lower EM. Moreover, this relationship is more pronounced among firms with highly educated CEOs (postgraduates) and mature CEOs (approaching retirement age). Notably, the negative CSR–EM relationship is strengthened in firms with mandatory CSR reports. This study expands prior research by exploring the impact of CEO characteristics on the CSR–EM relationship, incorporating CEO attributes alongside ownership structures and governance mechanisms. The findings offer insights for organizations in terms of selecting ethically committed CEOs, as well as guidance for shareholders in understanding CEO selection criteria. Furthermore, this study highlights the importance of mandatory CSR disclosure (CSRD) for policymakers evaluating CSR performance according to the disclosure type. [ABSTRACT FROM AUTHOR]

Previous studies have shown that audit quality is influenced by the audit engagement partner's characteristics. Extending this literature, we examine the association between audit engagement partner ideology (i.e. conservatism) and audit quality. We find that clients whose audit engagement partners are ideologically more conservative receive higher quality audits, as indicated by lower discretionary accruals than clients with less conservative auditors. Additionally, we find evidence that the relation between the auditor's ideology and that of the client's executives influences audit quality, as does the ideological homophily between the auditor and the client's audit committee. Homophilous pairings between the audit engagement partner and the client's executives, where the two parties share a similar ideology, are associated with both higher discretionary accruals and higher probabilities of restatement. Discretionary accruals are also shown to be higher when engagement partners share an ideology with their client's audit committee. We interpret these results as evidence of less effective monitoring by the engagement partner when they share political views with their clients. [ABSTRACT FROM AUTHOR]

The issue of earnings management continues to be focus of recent research in accounting due to its implications for capital market. This study assesses the effects of IFRS adoption on earnings management for emerging economy with specific evidence based on comprehensive samples of listed firms on South Africa (SA). Using a sample of 186 listed firms, the procedure supposes a random effect estimation to examine the relationship between earnings management and considered variable, for the "prior-IFRS period (2000 to 2004)" and the "post-IFRS period (2017 to 2022)". The finding confirms significant negative effect of IFRS-adoption on earnings misreporting, suggesting that IFRS-adoption caused a reduction in earnings manipulations in SA. Moreso, book-to-market values, returns on assets and cash flow from operations significantly explains earnings management practices in SA. Lastly, the outcome is observed to be robust and not sensitive to the methods applied for the test; thus, the evidence can be used to make informed policy decisions. The findings have implication for regulation, policy making, and would boost stakeholder's interests on the capital market in the economy. We recommend that regulators should ensure regular assessment and quality audits of firms' reports, as such would enhance the integrity of represented financial information and protect investor's funds. [ABSTRACT FROM AUTHOR]

The issue on how some managers misstate and manipulate their financial positions by underestimating or overestimating actual economic items has continued to draw attention. Research presents evidence that a change in accounting standards has implication for the reduction in such manipulations. Using evidence from in South Africa, this paper applies univariate analysis to examine whether there is difference between earnings manipulations during two accounting regulatory regimes - Generally Acceptable Accounting Practices (GAAP) and the International Financial Reporting Standards (IFRS). To ensure robustness, the paper used two measures of financial report manipulations - income smooth and earnings management. The finding confirms that the adoption of IFRS caused, to some extent a reduction in discretional income smoothing and earnings distortion. Furtherance, the outcome is robust and not sensitive to the methods applied for the test; thus, the evidence can be used to make informed policy decisions. The result has implication for regulation, policy making and modification of extant Standards. [ABSTRACT FROM AUTHOR]

In recent years, the issue of the position of senior CFOs due to their increasing responsibility regarding monitoring financial reporting and corporate governance systems, has attracted the attention of many researchers and experts. Considering the position and strategic position of CFOs in the economic and financial decisions of the company, it is necessary to understand their role and position in the company's financial reporting process. Therefore, the current research has investigated the relationship between some characteristics of senior CFOs, including their gender, tenure, and audit history with the quality of financial reporting. To measure the quality of financial reporting, was used the optional accruals index (Kasznik model); Also, CFOs in this research mean the highest financial authority of the company. Using a sample of 135 companies admitted to the Tehran Stock Exchange during the years 2015 to 2021 and using a multiple regression model to analyze the data, the research results show that the increase in tenure and the presence of women as CFO in the company causes reduces the quality of financial reporting. Also, the results of the research regarding the negative impact of CFOs with audit experience on the quality of financial reporting do not have the necessary significance. In total, the obtained evidence shows the significant role of CFOs in the structure of corporate governance and financial reporting, which indicates the need for legislators to pay special attention to this position.

Research Question: To what extent earnings management operations are used by Romanian entities listed on a regulated market and what is the impact of these operations on the quality of reported financial information? Motivation: The financial statements reported by each entity are intended to provide useful information all the users, they are intended to describe clearly and honestly presents the financial position and performance and cash flows respectively. There are cases where, out of a desire to gain the trust of stakeholders (investors and other equity providers), some entities tend to commit manipulations in financial reporting using earnings management. Idea: The study aims to assess the extent to which the operations of earnings management are used by the Romanian entities listed on a regulated market and the impact of these operations on the quality assurance of the reported financial information. Data: This study was conducted based on the information collected from the annual financial statements of the entities that are listed on the Bucharest Stock Exchange, for the period between 2019-2021 Tools: The collected data were analyzed using the Jonse model based on the linear regression analysis. Findings: Using the Jones model based on the linear regression analysis, the results of the study indicate a distortion of the results presented by the analyzed companies, a solid reason being given by the negative effects of the Covid-19 pandemic with a strong impact on the economic environment. Contribution: This study provides an overview of the concept of earnings management based on information from the specialized literature. The analysis of earnings management practices was undertaken on the listed entities in Romania.

The entire range of financial and non-financial activities carried out in companies has an impact on the quality of disclosures. The audit, through its specific procedural approach, contributes to enhancing the quality of reporting by balancing the interests of the two parties involved in the reporting process, i.e. the companies and the users of the information. The paper aims to assess the extent to which sustainability reporting influences audit quality, assessed from a dual perspective, namely that of the audited company (through the quality of the information published and insured by the audit) and that of the auditor (through the audit opinion expressed). Using information specific to companies listed on the main market of the Bucharest Stock Exchange, the study analyzes the link between a series of dummy variables associated with carrying out sustainable activities, social and environmental protection and the size of discretionary accruals, i.e. the audit opinion. The results reveal a negative relationship between the two dimensions analyzed. The involvement of companies in sustainable actions is generally interpreted as an effort that diminishes audit quality, measured from both perspectives. The effect of these social and environmental protection activities is correlated with potential manipulation of the results (decreasing the quality of financial information) and with increasing the likelihood of expressing a modified audit opinion, respectively. The results are also robust following the introduction of control variables into the analysis, such as: leverage, company growth, company size or industry.

This research investigates the nexus between the corporate life cycle (CLC) and accrual-based earnings management (AEM) and real earnings management (REM) practices. Companies listed on the main segment of the Bucharest Stock Exchange between 2007 and 2021 are analyzed through fixed effects and random effects models. The regression analysis uncovers that earnings management practices vary based on the developmental stage of the company. In the introduction stage, Romanian companies tend to prefer AEM techniques, while in the growth and maturity phases, REM practices are more prevalent. The conditions in which firms operate, the pressure from the capital market and the discretion over costs characteristic of each stage of development explain the preference for a certain method of earnings management. Overall, this investigation helps clarify CLC's role in adopting earnings management techniques (AEM/REM) and signals the need to pay particular attention to the quality of financial reporting of companies in the early stages of development. The findings hold significance for auditors, financial analysts, investors, lenders, and regulators alike.

Copyright of Serbian Journal of Management is the property of Serbian Journal of Management and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper investigates the relationship between earnings management and financial distress and considers whether this relationship varies based on the severity of financial distress and signs of discretionary accruals (a proxy for earnings management). For this purpose, multiple regression analysis has been employed on a sample of 192 financially distressed Indian firms during the period 2011–2018, counting to 1,272 firm-year observations. Discretionary accruals are estimated by the Modified Jones model and Raman and Shahrur (2008) model, while Altman's Z -score and distance-to-default model are used to detect the degree of financial distress. The findings disclose that the low distressed firms are indulged in higher earnings management than high distressed firms. Also, the low distressed firms are engaged more in income-decreasing earnings management. However, the results are not consistent across both earnings management and distress measures. The findings have significant implications for investors and creditors. They need to be aware of this fact while evaluating creditworthiness of a firm since firms with even a low degree of financial distress can indulge in earnings management to camouflage their true financial condition. [ABSTRACT FROM AUTHOR]

Narcissistic managers with characteristics such as desire for fame and power seeking to protect their interests have the necessary motivation to be effective on the relationship between discretionary accruals and credit rating and, as a result, change the credit rating of companies to their desired rating. The purpose of the present study is to investigate the relationship between discretionary accruals and credit rating by considering the moderating effect of managers' narcissism. The statistical sample of the current research includes 113 companies listed on the Tehran Stock Exchange and 17 companies listed on the Iranian Foreign Exchange in the period of 2011-2021. The data of this research was collected by referring to the Kodal website, the website of the Iranian Statistics Center and Rahvard Novin software. Hypotheses were tested through multivariate regression models and generalized least squares approach using EViews 12 software. The results of the statistical test of research hypotheses confirm that discretionary accruals have a positive and significant effect on the credit rating of economic units. That is, with the increase of discretionary accrual items, the credit rating of economic units increases. Also, the findings of the research indicate that there is a moderating effect of managers' narcissism with three indicators of the size of managers' signatures, managers' cash bonus and managers' photo in the relationship between discretionary accruals and the credit rating of economic units. In other words, managers' narcissism based on the indicators of the size of managers' signatures, managers' cash bonus and managers' photos strengthens the positive relationship between discretionary accruals and credit rating. Based on these results, credit rating agencies are suggested to pay more attention to the narcissistic factors of managers and discretionary accruals in the credit rating process of economic units. [ABSTRACT FROM AUTHOR]

The main source of financing is bank loans for Portuguese small and medium-sized entities (SMEs), which implies several constraints to obtaining additional funds. Relying on the argument of Positive Accounting Theory (PAT) that accounting choices are not neutral and on Agency Theory that information asymmetry prevails between insiders and outsiders, we analyzed the impacts of debt on earnings quality, focusing on its level, its increases, and its term of payment. We estimated econometric regressions using panel data with fixed effects over 2013–2019, using discretionary accruals as an inverse proxy of earnings quality. We found empirical evidence that the relationship between debt and earnings quality tends to vary in sign, as the quality of financial information deteriorates with debt, but as debt becomes high, firms tend to increase the quality of earnings. Furthermore, we found that short-term debt tends to decrease earnings quality more than long-term debt. This article aimed to contribute to the prior literature by collecting evidence that debt levels tend to be an incentive to increase earnings management and fill the gap by analyzing the influence of different debt features. This evidence is useful because earnings management may compromise both stakeholders' confidence and the efficient allocation of capital. [ABSTRACT FROM AUTHOR]

Purpose: The audit committee is a governance mechanism used to combat financial statement manipulation. Prior evidence of its effectiveness, however, varies. Institutional theory suggests that audit committees fulfil a ceremonial role, as top management's tone inhibits the committee's effectiveness. This study, therefore, examined how the tone at the top moderates the association between audit committee effectiveness and financial statement manipulation. Design/Methodology/Approach: Logit and panel regression were used to analyse 196 Johannesburg Stock Exchange-listed companies, from 2011 to 2018. Financial statement manipulation was measured using fraud and discretionary accruals, whilst principal component analysis was used to develop five audit committee components and two tone components. Findings: An active audit committee was associated with less manipulation, whereas greater governance expertise and independence were associated with more manipulation. Although the tone components showed no independent association with manipulation, a certain, pessimistic tone inhibited the committee's diversity and activity, nevertheless enhancing financial expertise and independence. Conversely, a realistic, diverse tone enhanced the committee's activity and diversity, however, inhibiting financial expertise. Research Limitations/Implications: Understanding the moderating role of tone at the top is crucial to stakeholders, in determining whether an audit committee can effectively execute its mandate. This study's findings imply that stakeholders cannot simply rely on compliance with governance codes to ensure an effective committee, they must also consider the tone at the top, so as to determine the committee's effectiveness. Originality: This study is the first to show how audit committees are either empowered or overpowered by tone at the top, in South Africa. [ABSTRACT FROM AUTHOR]

Utilizing a sample of 1258 reverse stock splits from 1988 to 2019, we contrast earnings management by firms that initiate reverse splits for diverse reasons. Literature suggests that the incentives for reverse splits vary based on firms' stock price ranges. As such, we use the pre‐split and target‐price ranges to separate the sample into three groups. We find a stark difference in discretionary accruals across these groups. While previous studies have treated earnings management and reverse splits as substitutes, we hypothesize that firms at risk of delisting may employ these two mechanisms as complements. Consistent with the hypothesis, we document a strong positive association between reverse splits and post‐split discretionary accruals for firms with pre‐split prices below $1. This relationship, however, is non‐existent among the remaining two groups. Our findings have two important implications for investors: (i) firms with different motives behind reverse splits exhibit different earnings management behavior and (ii) firms that are likely facing exchange delisting use discretionary accruals in complement with reverse stock splits. [ABSTRACT FROM AUTHOR]

Abstrak – Apakah Ketidakpastian Lingkungan Bisnis Berdampak pada Kualitas Laporan Keuangan? Tujuan Utama – Penelitian ini bertujuan untuk menguji ketidakpastian lingkungan bisnis berpengaruh terhadap kualitas laporan keuangan Metode – Metode penelitian ini menggunakan metode Generalized Least Square. Sampel penelitian ini adalah perusahaan publik Indonesia dari tahun 2019 hingga 2020. Temuan Utama - Manajer cenderung memanipulasi akrual laba ketika menghadapi ketidakpastian lingkungan yang tinggi. Hal tersebut dapat menurunkan kualitas pelaporan keuangan perusahaan. Efek negatif ketidakpastian terhadap kualitas pelaporan keuangan cenderung lebih tinggi untuk perusahaan yang menghadapi lingkungan yang kompleks dan dinamis. Implikasi Teori dan Kebijakan - Penelitian ini memberikan temuan empiris bahwa ketidakpastian lingkungan bisnis dapat mengurangi kualitas pelaporan keuangan. Selain itu, teori agensi menjadi semakin relevan dalam situasi bisnis yang tidak relevan. Kebaruan Penelitian - Penelitian ini telah mempertimbangkan aspek kompleksitas dan lingkungan yang dinamis pada variabel kontekstual kritis yang dapat mempengaruhi kualitas pelaporan keuangan. Abstract - Does Business Environment Uncertainty Impact the Quality of Financial Reporting? Main Purpose - This study aims to test the uncertainty of the business environment affects the quality of financial statements. Method - The research method used is Generalised Least Square method. The sample of this study is Indonesian public companies from 2019 to 2020. Main Findings - Managers tend to manipulate earnings accruals when facing high environmental uncertainty. This can reduce the quality of the company's financial reporting. The negative effect of uncertainty on financial reporting quality tends to be higher for companies facing complex and dynamic environments. Theory and Practical Implications - This study provides empirical findings that business environment uncertainty can reduce financial reporting quality. In addition, agency theory becomes increasingly relevant in irrelevant business situations. Novelty - This study has considered aspects of complexity and dynamic environments on critical contextual variables that can affect financial reporting quality.

This study explores the variations in discretionary accruals’ specific earnings management practices across different industries and their implications for financial reporting quality. Discretionary accruals are part of earnings management which affect the quality of financial reporting. These can distort financial statements and mislead stakeholders. Understanding how these practices differ among industries provides valuable insights for regulators, investors, and financial analysts. Yet, literature is overly scarce on specific industries which are most affected by discretionary accruals. Delving into information from a robust principles-based economy adopting IFRS, this paper addresses a research gap with a dataset spanning multiple industries over a multi-year period from 2013 to 2022. The Dechow, Kasznik, and Kothari models are employed to assess the extent of discretionary accruals within each industry. Based on winsorized mean and standard deviation, the industries which appeared most in the list of signed and absolute discretionary accruals were Energy and Financials followed closely by the Technology industry. Additionally, applying panel data regressions with multiple fixed effects, the size of a firm, equity ratio, asset turnover, and past profitability were significant in the models which influence discretionary accruals whereas the impact of liquidity was not statistically significant.

Purpose – The purpose of this study is to examine both accruals and real earnings management in a large sample of private companies in the UK using data from 2002 to 2009 following the implementation of the UK Act of 2006. Design/methodology/approach – A panel data analysis using GMM has been adopted to examine the objectives of the study and answer the research questions. Findings – The results of this study showed that the imposition of the Companies Act of 2006, on its own, did lead to changes in earnings management behaviour, in both accruals-based earnings and real earnings management. Moreover, this study also found that firms that chose to provide IFRS financial statements tended to show less discretionary earnings management, however, it tended to have no impact on real earnings management. Practical implications – In accordance with the research findings, standard setters with some insight tend to determine how capital markets see the information provided under the legislation such as the UK Act of 2006 in developed countries and thereby ensure long-term sustainability in a modern and sophisticated financial world. This study provides an insight into the successful implementation of the UK act of 2006, and its influence on the aspect of financial reporting. Originality/value – The novel conclusion reached in the study is that there exists a strong and direct link between the smooth implementation of UK Act of 2006 and the practices of both accruals and real earnings management in real-world business and financial scenarios, particularly, in private companies.

This paper’s primary goal is to examine the influence of a firm’s capital structures on practices of accrual-based earnings management by doing empirical research covering 51 non-financial Vietnamese listed companies during a period from 2013 to 2022. To estimate accrual-based earnings management practices, the modified Dechow and Dichev (2002) model was mobilized. Then, a regression between earnings management estimated values based on accruals and a group of capital structure variables and control variables that are hypothesized to influence earnings management practices is performed. The feasible generalized least square model is used to address econometric issues. Empirical results reveal that activities for managing accrual-based earnings indicate a considerable adverse influence from institutional ownership. However, other hypothesized variables that are management ownership, ownership concentration, foreign ownership, and leverage do not have a determinant sign as expected. ROA, one of five control factors, has a favorable impact on accrual-based earnings management practices, whereas company size has a negative impact. The study provides useful information to investors and stakeholders for their making investment decisions in Vietnam. The empirical findings are also based for recommendations to control earnings management practices at Vietnamese listed enterprises to enhance accounting information quality, thus contributing to the sustainable development of the Vietnam Stock Exchange.

The aim of this study is to determine whether a firm tax avoidance activity can be used as an instrument for corporate earnings management in an emerging market called Tunisia. The study also investigates the role of firm size, leverage and audit quality on earnings management. Evidence of earnings management is examined by focusing on accounting earnings management. From a sample of 20 Tunisian listed firms from 2017 to 2019, the results estimated from the linear regression model argue that tax aggressiveness has a positive effect on earnings management but not significant. Furthermore, the results show that larger Tunisian firms exhibit more earnings management. However, findings don’t show any significant effects of leverage and audit quality on earnings management.

This study examined the relationship between International Financial Reporting Standards (IFRS) and audit quality in Nigeria. With the growing adoption of IFRS, interest has risen about the efficiency of audits regarding accurate financial reporting. To actualize this, we investigated the impact of IFRS adoption on audit quality and identified challenges and opportunities for improvement. This study focused on companies quoted in the financial services sector of the Nigerian Exchange Group market between 2006 and 2022. A sample of twenty (20) financial institutions comprising of ten (10) banks and ten (10) insurance companies were selected, and data from audited annual reports was subjected to a static panel regression technique. Findings from the estimated regression revealed the existence of a positive connection between IFRS adoption and discretionary accruals based on the Modified Jones Model. Conversely, the regression coefficient revealed a significant negative relationship between the variables of this study when the discretionary expenses were considered. Based on the findings, audit quality has not improved after the adoption of IFRS. Equally, the adoption of IFRS has reduced discretionary expenses significantly. This study recommended among others that regulatory authorities should enforce appropriate application of accounting standard in order to reduce discretionary accruals and avoid manipulation of discretionary expense.

Purpose- This study investigates the interplay among Ownership Structure, Corporate Governance, and Earnings Management by employing ordinary least square (OLS) regression. To find the relationship among the three constructs based on data sourced from listed companies on the Pakistan Stock Exchange spanning 2016-2021 were used, excluding the financial industry due to its unique reporting system. Design/Methodology- The sample comprises 111 firms chosen based on data availability. To measure earnings management, the researchers used a modified version of John's model (1995) to estimate discretionary accruals. Findings- The study's key findings include the significant role of institutional investors in reducing earnings management. The number of board directors and ownership concentration were observed to impact discretionary accruals. Control variables indicated that more profitable, growing, and highly leveraged firms tend to engage in earnings management, which decreases with the firm's age. The study revealed a diverse relationship between ownership structure, corporate governance codes, and earnings management. Notably, significant institutional investment reduces ownership concentration, leading to decreased earnings management. Moreover, the results show a positive and significant correlation between firm size and Return on Assets (ROA). Practical Implications- Board independence was found to have a positive impact on earnings management, suggesting that boards serve a more complex role than mere monitoring to mitigate accounting manipulation.

This study provides evidence on how dividend policy affects earnings management. Our goal is to contribute to the literature by employing data from a sector (aerospace and defence) that to the best of our knowledge has never been studied before in terms of the relationship between earnings management and dividend policy. Our sample consists of 17 listed companies in the U.S. Stock Exchanges, examined for the 2012-2019 period. We employ panel data linear regression to conclude that the dividend policy positively affects the management's practice of discretionary accruals manipulation. Consequently, our results support the signalling hypothesis that points to the importance of a stable dividend policy. Specifically, we provide relevant and robust information on management decision making regarding value return to the shareholders of U.S. aerospace and defence companies. Finally, we provide future research proposals that may shed more light on this obscure relationship. [ABSTRACT FROM AUTHOR]

This study explores the variations in discretionary accruals' specific earnings management practices across different industries and their implications for financial reporting quality. Discretionary accruals are part of earnings management which affect the quality of financial reporting. These can distort financial statements and mislead stakeholders. Understanding how these practices differ among industries provides valuable insights for regulators, investors, and financial analysts. Yet, literature is overly scarce on specific industries which are most affected by discretionary accruals. Delving into information from a robust principles-based economy adopting IFRS, this paper addresses a research gap with a dataset spanning multiple industries over a multiyear period from 2013 to 2022. The Dechow, Kasznik, and Kothari models are employed to assess the extent of discretionary accruals within each industry. Based on winsorized mean and standard deviation, the industries which appeared most in the list of signed and absolute discretionary accruals were Energy and Financials followed closely by the Technology industry. Additionally, applying panel data regressions with multiple fixed effects, the size of a firm, equity ratio, asset turnover, and past profitability were significant in the models which influence discretionary accruals whereas the impact of liquidity was not statistically significant. [ABSTRACT FROM AUTHOR]

The present study examines the estimated accounting quality of micro, small and mediumsized enterprises (MSMEs) engaged in commercial activities in Hungary. The study uses empirical methods to measure discretionary accruals derived from total accruals of the Modified Jones model of Dechow et al. and evaluates the quality results obtained according to the auditability of the sample items and other control variables. Based on our empirical findings, it appears that audited firms exhibit reduced levels of accounting quality distortions relative to non-audited firms. To conduct more rigorous domestic analyses, we propose creating a model to measure accounting quality. The model should be developed and specified within the domestic accounting environment, and its potential relationship with various accounting and financial performance issues should be explored. [ABSTRACT FROM AUTHOR]

SUMMARY: The COVID-19 pandemic introduced unprecedented challenges to the audits of public companies. Audit firms, in response, dedicated significant resources to maintain high-quality audit procedures. We leverage a difference-in-differences design to examine the effects of the pandemic on audit outcomes. Despite audit firm efforts, we find evidence of a decline in audit quality in the initial months of the COVID-19 pandemic. Further, in the early days of the pandemic, the SEC made available a unique one-time, 45-day extension to file the audited annual report. In this time period, we observe a significant increase in the likelihood of delayed filings, including those attributed to the auditors' work. Our study informs regulators and audit firms about the broad impact of an unprecedented stressor on the audit process and on the efficacy of remote work. JEL Classifications: M4; M41; M42. [ABSTRACT FROM AUTHOR]