The Impacts of Auditor Characteristics and Compensation Components on Earnings Management: Evidence from Amortizations of Insurance Acquisition Costs

• Main Authors: Shu-Yun Deng, 鄧舒云
• Other Authors: Chi-Chun Liu
• Format: Others
• Language: en_US
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/07856629878211695054

碩士 === 國立臺灣大學 === 會計學研究所 === 100 === Unlike studies that use estimated abnormal accruals or loss reverse errors, in this study, I further extend Liu and Liao (2012) by using Deferred Acquisition Costs (DAC) amortization expense as a proxy for managerial discretion to investigate how various external auditor characteristics and executive compensation components related to executives discretionary reporting incentives (e.g. smoothing earnings, avoiding reported losses, meeting analysts’ forecast and taking a big bath) in insurance industry. Consistent with the prior literature utilizing estimated abnormal accruals(Cornett et al., 2008; 2009) and loss reserve errors (Browne et al., 2009; Eckles et al., 2011), my results suggest that external auditor characteristics (e. g. auditor tenures and auditor specialist) are associated with earnings manipulative behaviors; and incentive-based compensation (e. g. restricted stock grants, stock option awards, exercised, and exercisable, long-term performance plans and accounting-based bonus and performance plans) encourages managers to use discretion over accounting practices to maximize their own utility.