Do audit firm and audit costs/fees influence earnings management in Swedish municipalities? Pierre Donatella

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Uploaded by Pierre Donatella     Uploaded date: November 12, 2021    
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Publication date
December 01, 2019
Paper language
Abstract
Previous research on the private sector shows that auditors and auditing firms are important actors in ensuring high-quality reporting based on accrual accounting. The aim of this study is to explore whether audit firms and audit costs/fees influence municipalities’ probability of applying earnings management in their annual accounts. The empirical data, which covered the financial years 2011–13, were handpicked from annual reports or retrieved from other sources. In general, our study shows that the probability of earnings management increased if audit costs/fees increased. However, there were differences regarding the probability of earnings management relating to which audit firm was engaged. This implies that audit quality is a factor that affects the probability of earnings management in Swedish municipalities. The study also indicates that different audit firms make different trade-offs between professional versus commercial logics, and that this is reflected in the clients’ propensity to engage in earnings management.
Preferred Citation
Donatella, P., Haraldsson, M., & Tagesson, T. (2019). Do audit firm and audit costs/fees influence earnings management in Swedish municipalities?. International Review of Administrative Sciences, 85(4), 673-691.
Keywords
audit cost; audit fee; audit firm; earnings management; municipality
Email
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Category
  • Auditing
  • Financial accounting
Type of Paper
Published paper

How to get the paper

From the author (email)
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From the journal
International Review of Administrative Sciences

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