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

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  • Bryan, David B.
  • Mason, Terry W.

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.

Suggested Citation

  • Bryan, David B. & Mason, Terry W., 2016. "The influence of earnings management conducted through the use of accretive stock repurchases on audit fees," Advances in accounting, Elsevier, vol. 34(C), pages 99-109.
    • Handle: RePEc:eee:advacc:v:34:y:2016:i:c:p:99-109
    DOI: 10.1016/j.adiac.2016.08.001
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    References listed on IDEAS

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    Cited by:

    1. Alquhaif, Abdulsalam & Al-Gamrh, Bakr & Abdul Latif, Rohaida, 2020. "An overview of share buybacks: A descriptive case from Malaysia," Journal of Behavioral and Experimental Finance, Elsevier, vol. 28(C).

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