The Effect of Audit Quality on Earnings Management

Abstract

This report was made on “The Effect of Audit Quality on Earnings Management”. This report consists of five chapters. Each chapter has been defined with details description. Tables and figures of the analysis were included for better understanding. The report is described in a way that readers can understand about the study properly. After main study parts references and appendix is also added.The objective of the study is to examine the existence of earnings management within listed companies in the engineering and pharmaceutical industry of Bangladesh. The renowned modified Jones Model has been used to test whether the firms are involved in any sort of earnings manipulation or not. In addition, the tendency of the companies to continuous practice of earnings manipulation has been examined. The study covers a span of 3 years from 2015 to 2017 where the financial figures are tested on the model to find the probability of the companies being a manipulator of earnings. This paper also investigates the relationship between audit quality and earnings management by using 52 firms’ observations from listed companies DSE. Proxy and discretionary accruals are used to measure the earnings management. Result of the study suggest that there is no significant relationship between audit quality and earning management.