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Do audit firm and auditcosts/fees influenceearnings management inSwedish municipalities?
University of Gothenburg, School of Public Administration, Sweden.
Lund University, School of Economics and Management, Department of Business Administration, Sweden.
Linköping University, Department of Management and Engineering, Business Administration. Linköping University, Faculty of Arts and Sciences.
(English)In: International Review of Administrative Sciences, ISSN 0020-8523, E-ISSN 1461-7226Article in journal (Refereed) Epub ahead of print
Abstract [en]

Previous research on the private sector shows that auditors and auditing firms areimportant actors in ensuring high-quality reporting based on accrual accounting. Theaim of this study is to explore whether audit firms and audit costs/fees influencemunicipalities’ probability of applying earnings management in their annual accounts.The empirical data, which covered the financial years 2011–13, were handpicked fromannual reports or retrieved from other sources. In general, our study shows that theprobability of earnings management increased if audit costs/fees increased. However,there were differences regarding the probability of earnings management relating towhich audit firm was engaged. This implies that audit quality is a factor that affects theprobability of earnings management in Swedish municipalities. The study also indicatesthat different audit firms make different trade-offs between professional versus commerciallogics, and that this is reflected in the clients’ propensity to engage in earnings management.

Keywords [en]
audit cost, audit fee, audit firm, earnings management, municipality
National Category
Economics and Business
Identifiers
URN: urn:nbn:se:liu:diva-147046DOI: 10.1177/0020852317748730OAI: oai:DiVA.org:liu-147046DiVA, id: diva2:1196393
Available from: 2018-04-09 Created: 2018-04-09 Last updated: 2018-04-23

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CiteExportLink to record
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Citation style
  • apa
  • harvard1
  • ieee
  • modern-language-association-8th-edition
  • vancouver
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  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf