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Is There a Trade-Off Between Accrual-Based and Real Earnings Management Activities in the Presence of (fe) Male Auditors?

Author

Listed:
  • Andrews Owusu

    (Coventry University)

  • Alaa Mansour Zalata

    (University of Southampton
    Mansoura University)

  • Kamil Omoteso

    (University of Derby)

  • Ahmed A. Elamer

    (Mansoura University
    Brunel University of London)

Abstract

Prior research suggests that the presence of high-quality auditors (i.e. proxied by audit firm characteristics) constrains accrual-based earnings management, but it inadvertently leads to higher real activities manipulation. We investigate whether such trade-off exists between accrual-based and real earnings management activities in the presence of female or male auditors. We use a sample of UK firms for the period 2009 to 2016 and find that firms audited by female auditors do not resort to a higher-level real activities manipulation when their ability to engage in accruals management is constrained. Overall, our results suggest that the benefits of hiring female auditors (i.e. less accrual-based earnings management) are overwhelmingly higher than the costs they might bring to the client firms (i.e. higher real activities manipulation).

Suggested Citation

  • Andrews Owusu & Alaa Mansour Zalata & Kamil Omoteso & Ahmed A. Elamer, 2022. "Is There a Trade-Off Between Accrual-Based and Real Earnings Management Activities in the Presence of (fe) Male Auditors?," Journal of Business Ethics, Springer, vol. 175(4), pages 815-836, February.
    • Handle: RePEc:kap:jbuset:v:175:y:2022:i:4:d:10.1007_s10551-020-04672-5
    DOI: 10.1007/s10551-020-04672-5
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    3. Andrews Owusu & Frank Kwabi & Ernest Ezeani & Ruth Owusu-Mensah, 2022. "CEO tenure and cost of debt," Review of Quantitative Finance and Accounting, Springer, vol. 59(2), pages 507-544, August.
    4. Owusu, Andrews & Kwabi, Frank & Owusu-Mensah, Ruth & Elamer, Ahmed A, 2023. "Lead independent director, managerial risk-taking, and cost of debt: Evidence from UK," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).

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