Title

The influence of earnings management conducted through the use of accretive stock repurchases on audit fees

Document Type

Article

Publication Date

9-1-2016

Subject Area

ARRAY(0x55ffca672228)

Abstract

This study investigates whether auditor perceptions of risk are affected by accretive stock repurchases, which prior research has suggested is a form of earnings management. We argue that auditors are likely to view earnings management conducted through the use of accretive stock repurchases as a signal of increased risk, leading to higher audit fees. Consistent with our hypothesis, we find evidence of a positive and significant association between the use of accretive stock repurchases as an earnings management technique and audit fees. The results suggest that audit fees are 6.0% higher when accretive stock repurchases are used to manage earnings, which corresponds to an audit fee that is approximately $107,000 higher for the average firm-year observation in our sample.

Publication Title

Advances in Accounting

Volume

34

First Page

99

Last Page

109

Digital Object Identifier (DOI)

10.1016/j.adiac.2016.08.001

ISSN

08826110

Share

COinS