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Auditors’ and Audit Committee Members’ Perceptions of Earnings Management Motives and Techniques
Sompong Pornupatham,
Chulalongkorn University
ABSTRACT. This research measured perceptions of 288 external auditors and 87 audit committee members in Thailand of earnings management motives and techniques. Results indicated that firms managed earnings to increase share price, avoid loss, and avoid earnings’ decline. The top-three techniques were manipulation through related party transactions, early revenue recognition, and incorrect capitalisation. Findings showed external auditors had more experience in detecting earnings management than audit committee members. Big 4 auditors had more experience than non-Big 4 auditors in judgemental accounting manipulation. This is the first study to elicit both auditors’ and audit committee members’ perceptions of earnings management in Thailand. It may help users of financial statements to understand drivers of manipulation and identify risk areas in financial statements. It provides evidence for the need to reduce information asymmetry between auditors and audit committee members.
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