Affiliation:
1. Brigham Young University.
2. University of Nevada, Las Vegas.
Abstract
ABSTRACT: Internal auditors perform work that is relevant to their host entities' financial reporting processes; yet, little research attention has focused on the effects of internal auditing on companies' external financial reporting. Using a unique and previously unavailable data set, we investigate the relation between internal audit function (IAF) quality and earnings management. We measure IAF quality using a composite measure comprising six individual components of IAF quality based on SAS No. 65, which guides external auditors in assessing the quality of an IAF with respect to its role in financial reporting. Earnings management is measured using two separate proxies: (1) abnormal accruals and (2) the propensity to meet or barely beat analysts' earnings forecasts. We find evidence that IAF quality is associated with a moderation in the level of earnings management as measured by both proxies.
Publisher
American Accounting Association
Subject
Economics and Econometrics,Finance,Accounting
Reference58 articles.
1. Corporate governance, audit quality, and the Sarbanes-Oxley Act: Evidence from internal audit outsourcing;Abbott;The Accounting Review,2007
2. American Institute of Certified Public Accountants (AICPA). 1997. The Auditor's Consideration of the Internal Audit Function in an Audit of Financial Statements. Statement on Auditing Standards No. 65. Available at: http://www.aicpa.org/download/members/div/auditstd/AU-00322.PDF.
3. Auditing, directorships, and the demand for monitoring;Anderson;Journal of Accounting and Public Policy,1993
4. From critics to coaches;Anderson;Bank Management,1996
5. Association between accounting performance measures and stock prices;Anthony;Journal of Accounting and Economics,1992
Cited by
368 articles.
订阅此论文施引文献
订阅此论文施引文献，注册后可以免费订阅5篇论文的施引文献，订阅后可以查看论文全部施引文献