An Empirical Research On The Relationship Between Independent Audit Quality And Real Earnings Management

Earnings management is very common. It affects the quality of the accountingstatements and restricts the users of financial reports to make scientific decisions.Certified Accountants play an important role. Audit opinion is the result of audit. Theaudit quality should reflect the objectivity and fairness of the financial statements, auditopinion should be able to control the earnings management.Accruals earnings management and real earnings management are two basic waysto mange earnings.While earlier studies focus on accruals earnings management, morerecent papers suggest that firns also engage in real earnings management. Real earningsmanagement has negative consequences on future cash flows and might hurt firm valuein the long run. However, managing real activities is less likely to draw auditor’s andregulatory scrutiny’s attention. It just needs to properly disclosed in the financialstatements. Academics generally believe that real earnings management caused moreserious economic consequences to the company, and undermines the resource allocationfunction of capital market. From this perspective, the research of the real earningsmanagement behavior of listed companies has more theoretical value and practicalsignificance.Previous studies have shown that high quality audit can effectively constraintaccruals earnings management. This paper argues that the high quality of audit also canrestrict real earnings management behavior. Based on the audit opinions and audit fee asaudit quality proxy variable to measure audit quality, using a combination of theoreticalanalysis and empirical analysis to study the relationship between audit quality and realearnings management degree.