| Summary: | 碩士 === 輔仁大學 === 會計學系碩士班 === 97 === The purpose of this study is to explore the relation between Auditors’ industry specialization and real earnings management. The sample consists of listed companies from 1998 to 2007. This study predicts that auditors with industry specialization are capable to constrain firms’ earnings management behavior via the real business activity management. This study follows Roychowdhury (2006) to measure real earnings management behaviors (that is, manipulating the sales operation, overproduction and reducing the discretionary expenses to avoid reporting loss).
The empirical results evidence that listed companies indeed engage in real earnings management activities via manipulating their sales operation, increasing production, and reducing the discretionary expenses. Furthmore, following Krishnan (2003), this study uses number of clients -based market shares to proxy auditor’s industry specialization and finds that auditors with industry specialization can restrain real earnings management behaviors.
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