Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms

Abu MOLLIK, Monir MIR, Ron McIver, M Bepari

    Research output: A Conference proceeding or a Chapter in BookConference contribution

    1 Downloads (Pure)

    Abstract

    This paper empirically investigates the effects of audit quality on earnings management behaviour of Australian firms, if any, during the global financial crisis (GFC). In addressing this issue, we integrate several branches of the recent literature: earnings management behaviour and the GFC and audit quality. Earnings management, being represented by the discretionary components of total accruals was estimated based on the Jones (1991) and modified Jones (Dechow, Sloan, & Sweeney, 1995; Kothari, Leone, & Wasley, 2005) models. Audit quality is represented in use of a Big-N audit firm and through audit committee characteristics. We used parametric and non-parametric tests to identify differences in earnings management for firms audited by Big-4 and non Big-4 firms. We also used panel data regression methods to analyse the impact of audit quality and the GFC on the discretionary accruals. The sample comprised of an unbalanced panel of 149 firms for the period of 2006 to 2009. We find that although Australian firms engaged in a higher level of incomedecreasing earnings management during the GFC, with the exception of audit committee independence, audit quality, in general, did not have an impact in mitigating this behaviour. This contrasts with earlier research conducted on companies in Singapore and Malaysia, which examines the impact of audit quality in light of the Asian Financial Crisis.
    Original languageEnglish
    Title of host publicationProceedings of the 9th Asian Business Research Conference
    EditorsMd Mahbubul Hoque Bhuiyan
    Place of PublicationMelbourne
    PublisherWorld Business Institute
    Pages1-27
    Number of pages27
    ISBN (Print)9781922069399
    Publication statusPublished - 2013
    Event9th Asian Business Research Conference - Dhaka, Dhaka, Bangladesh
    Duration: 20 Dec 201321 Dec 2013

    Conference

    Conference9th Asian Business Research Conference
    CountryBangladesh
    CityDhaka
    Period20/12/1321/12/13

    Fingerprint

    Earnings management
    Audit quality
    Global financial crisis
    Empirical analysis
    Big 4
    Audit committee
    Malaysia
    Accruals
    Panel data
    Discretionary accruals
    Asian financial crisis
    Audit firms
    Unbalanced panels
    Singapore
    Nonparametric test
    Regression method

    Cite this

    MOLLIK, A., MIR, M., McIver, R., & Bepari, M. (2013). Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms. In M. M. H. Bhuiyan (Ed.), Proceedings of the 9th Asian Business Research Conference (pp. 1-27). Melbourne: World Business Institute.
    MOLLIK, Abu ; MIR, Monir ; McIver, Ron ; Bepari, M. / Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms. Proceedings of the 9th Asian Business Research Conference. editor / Md Mahbubul Hoque Bhuiyan. Melbourne : World Business Institute, 2013. pp. 1-27
    @inproceedings{a32626e2328749a1a1cde46041042a92,
    title = "Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms",
    abstract = "This paper empirically investigates the effects of audit quality on earnings management behaviour of Australian firms, if any, during the global financial crisis (GFC). In addressing this issue, we integrate several branches of the recent literature: earnings management behaviour and the GFC and audit quality. Earnings management, being represented by the discretionary components of total accruals was estimated based on the Jones (1991) and modified Jones (Dechow, Sloan, & Sweeney, 1995; Kothari, Leone, & Wasley, 2005) models. Audit quality is represented in use of a Big-N audit firm and through audit committee characteristics. We used parametric and non-parametric tests to identify differences in earnings management for firms audited by Big-4 and non Big-4 firms. We also used panel data regression methods to analyse the impact of audit quality and the GFC on the discretionary accruals. The sample comprised of an unbalanced panel of 149 firms for the period of 2006 to 2009. We find that although Australian firms engaged in a higher level of incomedecreasing earnings management during the GFC, with the exception of audit committee independence, audit quality, in general, did not have an impact in mitigating this behaviour. This contrasts with earlier research conducted on companies in Singapore and Malaysia, which examines the impact of audit quality in light of the Asian Financial Crisis.",
    author = "Abu MOLLIK and Monir MIR and Ron McIver and M Bepari",
    year = "2013",
    language = "English",
    isbn = "9781922069399",
    pages = "1--27",
    editor = "Bhuiyan, {Md Mahbubul Hoque}",
    booktitle = "Proceedings of the 9th Asian Business Research Conference",
    publisher = "World Business Institute",

    }

    MOLLIK, A, MIR, M, McIver, R & Bepari, M 2013, Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms. in MMH Bhuiyan (ed.), Proceedings of the 9th Asian Business Research Conference. World Business Institute, Melbourne, pp. 1-27, 9th Asian Business Research Conference, Dhaka, Bangladesh, 20/12/13.

    Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms. / MOLLIK, Abu; MIR, Monir; McIver, Ron; Bepari, M.

    Proceedings of the 9th Asian Business Research Conference. ed. / Md Mahbubul Hoque Bhuiyan. Melbourne : World Business Institute, 2013. p. 1-27.

    Research output: A Conference proceeding or a Chapter in BookConference contribution

    TY - GEN

    T1 - Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms

    AU - MOLLIK, Abu

    AU - MIR, Monir

    AU - McIver, Ron

    AU - Bepari, M

    PY - 2013

    Y1 - 2013

    N2 - This paper empirically investigates the effects of audit quality on earnings management behaviour of Australian firms, if any, during the global financial crisis (GFC). In addressing this issue, we integrate several branches of the recent literature: earnings management behaviour and the GFC and audit quality. Earnings management, being represented by the discretionary components of total accruals was estimated based on the Jones (1991) and modified Jones (Dechow, Sloan, & Sweeney, 1995; Kothari, Leone, & Wasley, 2005) models. Audit quality is represented in use of a Big-N audit firm and through audit committee characteristics. We used parametric and non-parametric tests to identify differences in earnings management for firms audited by Big-4 and non Big-4 firms. We also used panel data regression methods to analyse the impact of audit quality and the GFC on the discretionary accruals. The sample comprised of an unbalanced panel of 149 firms for the period of 2006 to 2009. We find that although Australian firms engaged in a higher level of incomedecreasing earnings management during the GFC, with the exception of audit committee independence, audit quality, in general, did not have an impact in mitigating this behaviour. This contrasts with earlier research conducted on companies in Singapore and Malaysia, which examines the impact of audit quality in light of the Asian Financial Crisis.

    AB - This paper empirically investigates the effects of audit quality on earnings management behaviour of Australian firms, if any, during the global financial crisis (GFC). In addressing this issue, we integrate several branches of the recent literature: earnings management behaviour and the GFC and audit quality. Earnings management, being represented by the discretionary components of total accruals was estimated based on the Jones (1991) and modified Jones (Dechow, Sloan, & Sweeney, 1995; Kothari, Leone, & Wasley, 2005) models. Audit quality is represented in use of a Big-N audit firm and through audit committee characteristics. We used parametric and non-parametric tests to identify differences in earnings management for firms audited by Big-4 and non Big-4 firms. We also used panel data regression methods to analyse the impact of audit quality and the GFC on the discretionary accruals. The sample comprised of an unbalanced panel of 149 firms for the period of 2006 to 2009. We find that although Australian firms engaged in a higher level of incomedecreasing earnings management during the GFC, with the exception of audit committee independence, audit quality, in general, did not have an impact in mitigating this behaviour. This contrasts with earlier research conducted on companies in Singapore and Malaysia, which examines the impact of audit quality in light of the Asian Financial Crisis.

    M3 - Conference contribution

    SN - 9781922069399

    SP - 1

    EP - 27

    BT - Proceedings of the 9th Asian Business Research Conference

    A2 - Bhuiyan, Md Mahbubul Hoque

    PB - World Business Institute

    CY - Melbourne

    ER -

    MOLLIK A, MIR M, McIver R, Bepari M. Effects Of Audit Quality on Earnings Management during the Global Financial Crisis: An Empirical Analysis of Australian Firms. In Bhuiyan MMH, editor, Proceedings of the 9th Asian Business Research Conference. Melbourne: World Business Institute. 2013. p. 1-27