Audit Partner Characteristics and Real Earnings Management Practices in Jordan
Audit Partner Characteristics and Real Earnings Management Practices in Jordan

Summary/Abstract: The financial scandals that occurred of late have raised concerns on the effectiveness of external audit in restricting earnings management. Also, audit failure in the capital market has led to augmented concerns towards audit quality. In addition, an external audit considers an external monitoring mechanism in which “independent” auditors carry out audits on a firm’s internal controls and financial reports and provide their opinions to the company’s owners. Besides that, the external audit is expected to deter the management from managing earnings. Thus, this study explores the effect of the individual attributes of the audit partner on real earnings management practices in Jordan. To do so, data from 58 ASE-listed companies were analysed for six years, i.e., from 2013 to 2018. The results indicated that audit partner tenure and REM are positively and significantly related. Furthermore, audit partner affiliation was found to be negatively and significantly associated with REM. Meanwhile, audit partner age and educational background were shown to have no effect on REM. The findings of the current study have implications on investors, regulators, and market participants by affording a considerable indication that the attributes of audit partners are very crucial in explaining the REM activities.

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