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Earnings Management of the Affiliated Business Groups: The Effect of Whether Being Audited by the Same CPA Firm
Ruey - Dang Chang,
National Sun Yat - Sen University Taiwan
Chun - Ju Fang, Tunghai University Taiwan
Yee - Chy Tseng, Tainan University of Technology Taiwan
ABSTRACT. The purpose of this study is to examine whether or not earnings management behavior differs 1) between companies with affiliated business groups and companies with no affiliated business groups and 2) between companies with affiliated business groups audited by the same CPA firm and those audited by different CPA firms. Empirical results show that companies with affiliated business groups have higher scores in earnings management, compared to companies with no affiliated business groups. Furthermore, among companies with affiliated business groups, those with affiliated companies audited by different CPA firms show significantly more earnings management than those with all affiliated business groups audited by the same CPA firm. The results of this study help us to gain a better understanding of earnings management behavior and point a way to improve financial reporting quality.
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