3. Auditor Jeong-Bon This paper A sample of 1. They adopt two proxies 1. When managers carry Kim, examines 33163 for earnings management; out income-increasing Richard the those are discretionary earnings management, Big Chung and observations accruals and abnormal 6 auditors are more Michael reactions which is working capital accruals effective than non-Big 6 Firth (2003) between composed of and calculate them through auditors; and Big 6 and 4810 non-Big the extended version of the 2. When managers have earnings non-Big 6 6 modified Jones 1991 incentives to make auditors observations model; income-decreasing with and 28353 2. Then they use the earnings management, regard to Big 6 treatment effects non-Big 6 auditors are two types observations model which consist of effective than Big 6 of with two stages. Firstly, they auditors. earnings sufficient estimate a multivariate data during probit model by defining carried the period the dependent variable as out by from 1984 to the probability of managers, 1998 in choice for Big 6 managers’ which are America. auditor. Next, they run the second regression by including the managers’ and accrual choices and the auditor choice as well as other firm-specific earnings variables. 4. Auditor Larry R. This paper A sample of 1. They adopt the original 1. When auditor tenure tenure, Davis, Billy examines 855 firms Jones (1991) model to increases, the absolute auditor Soo and the during the estimate discretionary discretionary accruals Greg period from accruals; increases and the absolute and Trompeter between 1981 to 1998 2. They classify the forecast errors decline; earnings (2001) auditor in America. sample into two groups, 2. The longer the auditor tenure and one concludes the firms tenure is, the more earnings employing a single auditor earnings management the and the other one includes mangers carry out aiming the firms with changing to meet earnings forecast; audit; 3. When auditor tenure 3. Then they run the increases, the discretionary regression model to test accruals become more the relationship between negative indicating that discretionary accruals and clients save earnings for auditor tenure. future use.
3. Auditor and earnings Jeong-Bon Kim, Richard Chung and Michael Firth (2003) This paper examines the reactions between Big 6 and non-Big 6 auditors with regard to two types of earnings carried out by managers, which are and earnings A sample of 33163 observations which is composed of 4810 non-Big 6 observations and 28353 Big 6 observations with sufficient data during the period from 1984 to 1998 in America. 1. They adopt two proxies for earnings management; those are discretionary accruals and abnormal working capital accruals and calculate them through the extended version of the modified Jones 1991 model; 2. Then they use the treatment effects model which consist of two stages. Firstly, they estimate a multivariate probit model by defining the dependent variable as the probability of managers’ choice for Big 6 auditor. Next, they run the second regression by including the managers’ accrual choices and the auditor choice as well as other firm-specific variables. 1. When managers carry out income-increasing earnings management, Big 6 auditors are more effective than non-Big 6 auditors; 2. When managers have incentives to make income-decreasing earnings management, non-Big 6 auditors are effective than Big 6 auditors. 4. Auditor tenure, auditor and earnings Larry R. Davis, Billy Soo and Greg Trompeter (2001) This paper examines the between auditor tenure and earnings A sample of 855 firms during the period from 1981 to 1998 in America. 1. They adopt the original Jones (1991) model to estimate discretionary accruals; 2. They classify the sample into two groups, one concludes the firms employing a single auditor and the other one includes the firms with changing audit; 3. Then they run the regression model to test the relationship between discretionary accruals and auditor tenure. 1. When auditor tenure increases, the absolute discretionary accruals increases and the absolute forecast errors decline; 2. The longer the auditor tenure is, the more earnings management the mangers carry out aiming to meet earnings forecast; 3. When auditor tenure increases, the discretionary accruals become more negative indicating that clients save earnings for future use.