| Summary: | 碩士 === 國立東華大學 === 會計與財務碩士學位學程 === 101 === This study examines the association between audit quality and earnings quality in firms trading on Taiwan Stock Exchange and GreTai Securities Markets from 1986 to 2010. This study measures audit quality with Big 4 auditors and auditor tenure and measures earnings quality with dividends and conservatism. This study expects that the firms with better audit quality have more persistent earnings, and they tend to pay dividends regularly. This study also expects that audit quality more positively affects firms’ dividends and conservatism after the mandatory rotation was promulgated in 2003.
The results show a significant and positive association between audit quality and dividend payout. Such an association is more pronounced after the mandatory rotation was promulgated. Moreover, the mandatory rotation increases the level of firms’ conservatism. The results also show a significant and positive association between auditor tenure and dividend payout after the mandatory rotation was promulgated. However, the positive association between big audit firms and dividend payout becomes insignificant after the mandatory rotation was promulgated. This result is attributed to the weak association between the mandatory rotation and firms’ propensity toward changing audit firms. Besides, this study conducts several sensitivity analyses, such as winsorizing observations that have the largest 1% and smallest 1% values for variables, using the amount of dividends paid and the firm’s dividend growth rates instead of the dividend possibility and controlling for the potential impact involving employee-bonus expensing policy, and finds the regression results remain robust.
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