Abstract:

This study investigates the relationship between the earnings management and auditor size using 645 observations from the companies listed in the Istanbul Stock Exchange National All Index between 2005-2008. Discretionary accruals are used to measure the earnings management. According to the results, there is a negative and statistically significant relationship between the discretionary accruals and auditor size. This result suggests that the big four auditors constrain the earnings management in Turkey. The other audit related variables, namely audit opinion and audit difficulty, are not found to be associated with the earnings management for the whole sample. However, there is a positive relationship between the discretionary accruals and the audit difficulty for the subsample of big four auditors, and the audit qualification for the subsample of non-big four auditors. Additionally, firm performance, firm size, leverage and income change are associated with the earnings management

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