Does audit quality influence earnings management in emerging markets? Evidence from Jordan

  1. Almarayeh, Taha Suleiman 1
  2. AIBAR-GUZMAN, Beatriz 2
  3. Abdullatif, Modar 3
  1. 1 Amman Arab University
    info

    Amman Arab University

    Ammán, Jordania

    ROR https://ror.org/039xekb14

  2. 2 Universidade de Santiago de Compostela
    info

    Universidade de Santiago de Compostela

    Santiago de Compostela, España

    ROR https://ror.org/030eybx10

  3. 3 Princess Sumaya University for Technology
    info

    Princess Sumaya University for Technology

    Ammán, Jordania

    ROR https://ror.org/01jy46q10

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Revista:
Revista de contabilidad = Spanish accounting review: [RC-SAR]

ISSN: 1138-4891

Ano de publicación: 2020

Volume: 23

Número: 1

Páxinas: 64-74

Tipo: Artigo

DOI: 10.6018/RCSAR.365091 DIALNET GOOGLE SCHOLAR lock_openDIGITUM editor

Outras publicacións en: Revista de contabilidad = Spanish accounting review: [RC-SAR]

Obxectivos de Desenvolvemento Sustentable

Resumo

This study investigates whether some audit quality attributes are capable to restrict earnings management in a developing country, Jordan, whose cultural, economic and institutional context is very different from most previously analyzed countries’ context. Generalized least square regression (GLS) was used to study the association between two audit quality attributes (auditor size and audit fees) and discretionary accruals, as a proxy of earnings management, for a sample of industrial firms listed on the Amman Stock Exchange during the period 2012 – 2016. The findings are consistent with the expectation that in emerging countries external audit can function differently from that in Anglo-Saxon and West-European countries with regard to its role in restricting earnings management and indicate that, given the institutional environment in Jordan, auditor size and audit fees have no significant effect on earnings management. This study provides readers with information about if and how the institutional setting influences the relationship between audit quality and earnings management. Furthermore, it presents new evidence regarding the moderating effect of the level of audit fees on their relation with earnings management. This study’s findings could provide valuable information to regulators and standards setters, both in Jordan and other countries with a similar economic and institutional environment, which can help in preventing earnings management practices.

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