1,764
Views
15
CrossRef citations to date
0
Altmetric
Articles

Do auditors care about real earnings management in their audit fee decisions?

, &
Pages 21-41 | Received 26 Jan 2015, Accepted 29 Aug 2016, Published online: 14 Sep 2016

References

  • Abbott, L., S. Parker, G. Peters, and K. Raghunandan. 2003. “The Association between Audit Committee Characteristics and Audit Fees.” Auditing: A Journal of Practice & Theory 22 (2): 17–32.10.2308/aud.2003.22.2.17
  • Abbott, L., S. Parker, and G. Peters. 2006. “Earnings Management, Litigation Risk, and Asymmetric Audit Fee Responses.” Auditing: A Journal of Practice & Theory 25 (1): 85–98.10.2308/aud.2006.25.1.85
  • Allen, A., and A. Woodland. 2010. “Education Requirements, Audit Fees, and Audit Quality.” Auditing: A Journal of Theory & Practice 29 (2): 1–25.10.2308/aud.2010.29.2.1
  • Antle, R., and E. Gordon. 2006. “The Joint Determination of Audit Fees, Non-audit Fees, and Abnormal Accruals.” Review of Quantitative Finance and Accounting 27: 235–266.10.1007/s11156-006-9430-y
  • Ashbaugh, H., R. LaFond, and B. Mayhew. 2003. “Do Non-audit Services Compromise Auditor Independence? Further Evidence.” The Accounting Review 78: 611–639.10.2308/accr.2003.78.3.611
  • Baber, W., K. Kumar, and T. Verghese. 1995. “Client Security Price Reactions to the Laventhol and Horwath Bankruptcy.” Journal of Accounting Research 33 (2): 385–395.10.2307/2491494
  • Becker, C., M. Defond, J. Jiambalvo, and K. R. Subramanyam. 1998. “The Effect of Audit Quality on Earnings Management.” Contemporary Accounting Research 15 (1): 1–24.10.1111/care.1998.15.issue-1
  • Behn, B., J. Carcello, D. Hermanson, and R. Hermanson. 1999. “Client Satisfaction and Big 6 Audit Fees.” Contemporary Accounting Research 16: 587–608.10.1111/care.1999.16.issue-4
  • Campello, M., and J. Graham. 2013. “Do Stock Prices Influence Corporate Decisions? Evidence from the Technology Bubble.” Journal of Financial Economics 107: 89–110.10.1016/j.jfineco.2012.08.002
  • Chaney, P., D. Jeter, and L. Shivakumar. 2004. “Self‐selection of Auditors and Audit Pricing in Private Firms.” The Accounting Review 79: 51–72.10.2308/accr.2004.79.1.51
  • Chi, W., L. Lisic, and M. Pevzner. 2011. “Is Enhanced Audit Quality Associated with Greater Real Earnings Management?” Accounting Horizons 25 (2): 315–335.10.2308/acch-10025
  • Choi, J., J. Kim, X. Liu, and D. Simunic. 2009. “Cross‐listing Audit Fee Premiums: Theory and Evidence.” The Accounting Review 84: 1429–1463.10.2308/accr.2009.84.5.1429
  • Choi, A., J.–H. Choi, and B. C. Sohn. 2015. “The Joint Effect of Audit Quality and Legal Regimes on the Use of Earnings Management: International Evidence.” Working Paper. Seoul National University.
  • Cohen, D., and P. Zarowin. 2010. “Accrual-based and Real Earnings Management Activities around Seasoned Equity Offerings.” Journal of Accounting and Economics 50: 2–19.10.1016/j.jacceco.2010.01.002
  • Cohen, D., A. Dey, and T. Lys. 2008. “Real and Accrual‐based Earnings Management in the Pre‐ and Post‐Sarbanes‐Oxley Periods.” The Accounting Review 83: 757–787.10.2308/accr.2008.83.3.757
  • Craswell, A., and J. Francis. 1999. “Pricing of Initial Audit Engagements.” The Accounting Review 74: 201–216.10.2308/accr.1999.74.2.201
  • Craswell, A., J. Francis, and S. Taylor. 1995. “Auditor Brand Name Reputations and Industry Specializations.” Journal of Accounting and Economics 20: 297–322.10.1016/0165-4101(95)00403-3
  • Dechow, P., and I. Dichev. 2002. “The Quality of Accruals and Earnings: The Role of Accrual Estimation Errors.” The Accounting Review 77: 35–59.10.2308/accr.2002.77.s-1.35
  • Dechow, P., R. Sloan, and A. Sweeney. 1995. “Detecting Earnings Management.” The Accounting Review 70: 193–225.
  • Ewert, R., and A. Wagenhofer. 2005. “Economic Effects of Tightening Accounting Standards to Restrict Earnings Management.” The Accounting Review 80: 1101–1124.10.2308/accr.2005.80.4.1101
  • Fama, E., and K. French. 1997. “Industry Costs of Equity.” Journal of Financial Economics 43: 153–193.10.1016/S0304-405X(96)00896-3
  • Fama, E., and J. MacBeth. 1973. “Risk, Return, and Equilibrium: Empirical Tests.” Journal of Political Economy 81: 607–636.10.1086/260061
  • Fan, J., and T. J. Wong. 2005. “Do External Auditors Perform a Corporate Governance Role in Emerging Markets? Evidence from East Asia.” Journal of Accounting Research 43: 35–72.10.1111/joar.2005.43.issue-1
  • Francis, J., and D. Simon. 1987. “A Test of Audit Pricing in the Small-client Segment of the US Audit Market.” The Accounting Review 62: 145–157.
  • Francis, J., and E. Wilson. 1988. “Auditor Changes: A Joint Test of Theories Relating to Agency Costs and Auditor Differentiation.” The Accounting Review 63: 663–682.
  • Frankel, R., M. Johnson, and K. Nelson. 2002. “The Relation between Auditors’ Fees for Non-audit Services and Earnings Quality.” The Accounting Review 77: 77–104.
  • Graham, J., C. Harvey, and S. Rajgopal. 2005. “The Economic Implications of Corporate Financial Reporting.” Journal of Accounting and Economics 40: 3–73.10.1016/j.jacceco.2005.01.002
  • Griffin, P. A., D. H. Lont, and Y. Sun. 2008. “Corporate Governance and Audit Fees: Evidence of Countervailing Relations.” Journal of Contemporary Accounting & Economics 4: 18–49.10.1016/S1815-5669(10)70028-X
  • Gul, F., C. Chen, and J. Tsui. 2003. “Discretionary Accounting Accruals, Managers’ Incentives, and Audit Fees.” Contemporary Accounting Research 20: 441–464.10.1506/686E-NF2J-73X6-G540
  • Gunny, K. 2010. “The Relation between Earnings Management Using Real Activities Manipulation and Future Performance: Evidence from Meeting Earnings Benchmarks.” Contemporary Accounting Research 27 (3): 855–888.10.1111/j.1911-3846.2010.01029.x
  • Hadlock, C., and J. Pierce. 2010. “New Evidence on Measuring Financial Constraints: Moving beyond the KZ Index.” Review of Financial Studies 23: 1909–1940.10.1093/rfs/hhq009
  • Hay, D., and W. Knechel. 2010. “The Effects of Advertising and Solicitation on Audit Fees.” Journal of Accounting and Public Policy 29: 60–81.10.1016/j.jaccpubpol.2009.10.001
  • Hay, D., W. Knechel, and N. Wong. 2006. “Audit Fees: A Meta-analysis of the Effect of Supply and Demand Attributes.” Contemporary Accounting Research 23: 141–191.10.1506/4XR4-KT5V-E8CN-91GX
  • Healy, P., and J. Wahlen. 1999. “A Review of the Earnings Management Literature and Its Implications for Standard Setting.” Accounting Horizons 13: 365–383.10.2308/acch.1999.13.4.365
  • Hogan, C., and M. Wilkins. 2008. “Evidence on the Audit Risk Model: Do Auditors Increase Audit Fees in the Presence of Internal Control Deficiencies?” Contemporary Accounting Research 25 (1): 219–242.10.1506/car.25.1.9
  • Huang, H., L. Liu, K. Raghunandan, and D. Rama. 2007. “Auditor Industry Specialization, Client Bargaining Power, and Audit Fees: Further Evidence.” Auditing: A Journal of Theory & Practice 26 (1): 147–158.10.2308/aud.2007.26.1.147
  • Huang, H., K. Raghunandan, and D. Rama. 2009. “Audit Fees for Initial Audit Engagements before and after SOX.” Auditing: A Journal of Practice & Theory 28 (1): 171–190.10.2308/aud.2009.28.1.171
  • Johnstone, K., and J. Bedard. 2001. “Engagement Planning, Bid Pricing, and Client Response in the Market for Initial Attest Engagements.” The Accounting Review 76: 199–220.10.2308/accr.2001.76.2.199
  • Jones, J. 1991. “Earnings Management during Import Relief Investigations.” Journal of Accounting Research 29: 193–228.10.2307/2491047
  • Kaplan, S., and L. Zingales. 1997. “Do Investment-cash Flow Sensitivities Provide Useful Measures of Financing Constraints?” The Quarterly Journal of Economics 112: 169–215.10.1162/003355397555163
  • Kim, Y., and M. Park. 2014. “Real Activities Manipulation and Auditors’ Client-retention Decisions.” The Accounting Review 89 (1): 367–401.10.2308/accr-50586
  • Kim, J., and B. Sohn. 2013. “Real Earnings Management and Cost of Capital.” Journal of Accounting and Public Policy 32 (6): 518–543.10.1016/j.jaccpubpol.2013.08.002
  • Kothari, S., A. Leone, and C. Wasley. 2005. “Performance Matched Discretionary Accrual Measures.” Journal of Accounting and Economics 39: 163–197.10.1016/j.jacceco.2004.11.002
  • Krishnan, G., L. Sun, Q. Wang, and R. Yang. 2013. “Client Risk Management: A Pecking Order Analysis of Auditor Response to Upward Earnings Management Risk.” Auditing: A Journal of Practice & Theory 32 (2): 147–169.10.2308/ajpt-50372
  • Levitt, A. 1998. The Numbers Game. Remarks by Chairman Arthur Levitt at the NYU Center for Law and Business. New York. http://www.sec.gov.
  • Linck, J., J. Netter, and T. Shu. 2013. “Can Managers Use Discretionary Accruals to Ease Financial Constraints? Evidence from Discretionary Accruals prior to Investment.” The Accounting Review 88 (6): 2117–2143.10.2308/accr-50537
  • Mansi, S., W. Maxwell, and D. Miller. 2004. “Does Auditor Quality and Tenure Matter to Investors? Evidence from the Bond Market.” Journal of Accounting Research 42 (4): 755–793.10.1111/j.1475-679X.2004.00156.x
  • Menon, K., and D. Williams. 1994. “The Insurance Hypothesis and Market Prices.” The Accounting Review 69 (2): 327–342.
  • Mizik, N., and R. Jacobson. 2007. “Myopic Marketing Management: Evidence of the Phenomenon and Its Long-term Performance Consequences in the SEO Context.” Marketing Science 26: 361–379.10.1287/mksc.1060.0261
  • O’Malley, S. 1993. “Legal Liability is Having a Chilling Effect on the Auditor’s Role.” Accounting Horizons 7 (2): 82–87.
  • Palmrose, Z. 1986a. “Audit Fees and Auditor Size: Further Evidence.” Journal of Accounting Research 24: 97–110.10.2307/2490806
  • Palmrose, Z. 1986b. “The Effect of Non-audit Services on the Pricing of Audit Services: Further Evidence.” Journal of Accounting Research 24: 405–411.10.2307/2491144
  • Roychowdhury, S. 2006. “Earnings Management through Real Activities Manipulation.” Journal of Accounting and Economics 42: 335–370.10.1016/j.jacceco.2006.01.002
  • Simon, D., and J. Francis. 1988. “The Effects of Auditor Change on Audit Fees: Test of Price Cutting and Price Recovery.” The Accounting Review 63: 255–269.
  • Simunic, D. 1980. “The Pricing of Audit Services: Theory and Evidence.” Journal of Accounting Research 18: 161–190.10.2307/2490397
  • Srinidhi, B., and F. Gul. 2007. “The Differential Effects of Auditors’ Nonaudit and Audit Fees on Accrual Quality.” Contemporary Accounting Research 24: 595–629.10.1506/ARJ4-20P3-201K-3752
  • Whisenant, S., S. Sankaraguruswamy, and K. Raghunandan. 2003. “Evidence on the Joint Determination of Audit and Non-audit Fees.” Journal of Accounting Research 41: 721–744.10.1111/1475-679X.00121
  • Willenborg, M. 1999. “Empirical Analysis of the Economic Demand for Auditing in the Initial Public Offerings Market.” Journal of Accounting Research 37 (1): 225–238.10.2307/2491405
  • Zang, A. 2012. “Evidence on the Trade-off between Real Activities Manipulation and Accrual-based Earnings Management.” The Accounting Review 87 (2): 675–703.10.2308/accr-10196

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.