Is there a trade-off between accrual-based and real earnings management activities in the presence of (fe) male auditors?

Andrews Owusu, Alaa Zalata, Kamil Omoteso, Ahmed Elamer

Research output: Contribution to journalArticle

Abstract

Prior research suggests that the presence of high quality auditors (i.e. proxied by audit firm characteristics) constrains accrual-based earnings management, but it inadvertently leads to higher real activities manipulation. We investigate whether such trade-off exists between accrual-based and real earnings management activities in the presence of female or male auditors. We use a sample of UK firms for the period 2009 to 2016 and find that firms audited by female auditors do not resort to a higher level real activities manipulation when their ability to engage in accruals management is constrained. Overall, our results suggest that the benefits of hiring female auditors (i.e. less accrual-based earnings management) are overwhelmingly higher than the costs they might bring to the client firms (i.e. higher real activities manipulation).
Original languageEnglish
Pages (from-to)(In-Press)
JournalJournal of Business Ethics
Volume(In-Press)
Publication statusAccepted/In press - 1 Nov 2020

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