Can Enhanced Audit Quality Reduce Higher Real Earnings Management? - Evidence from China

摘要

In this paper we use data from listed companies in China to examine whether the firms with incentives to manage earnings upwards resort to real earnings management when facing higher audit quality. Based on our OSL model, we suggest that higher audit quality increases the level of real earnings management in the companies with upward incentives to management earnings. And the potential reason is the constraints on accrual earnings management at higher audit quality. Our results are helpful to regulate information disclosure.