The Changes of the Relationship between Audit Quality and Earnings Management after Financial Crisis

Authors: Chengxuan Geng, Yizhou E

Abstract:

This paper mainly examines the changes in the relationship between earnings management and audit quality before and after financial crisis in the context of American firms from 2005 to 2010. Based on a sample of 3584 firm year observations, we find that there are changes concerning the relation between accrual-based earnings management and audit quality during the pre-crisis and post-crisis periods. However, the results do not provide enough evidence with regard to the variances in the association between real activities earnings management and audit quality during these two periods.

Keywords: audit quality, earnings management, financial crisis, relationship