کیفیت حسابرسی، تامین مالی بدهی و مدیریت سود: شواهد از اردن Audit quality, debt financing, and earnings management: Evidence from Jordan

1. Introduction Earnings management is of considerable interest to company stakeholders, especially when earnings are frequently deemed to be suitable forecasters of financial reporting quality (FRQ), since accounting accruals are instructive around FRQ. Nevertheless, accruals might also perform as unreliable forecasters of FRQ due to possible bias and manipulation. Audit quality plays an important role in reducing earnings management since auditors perform a certification task concerning financial statement credibility. Moreover, since debt influences managerial inducements and reporting selections, the association between debt and FRQ relies on accruals. This paper presents an investigation into relations among three widely researched areas, namely audit quality, debt financing, and earnings management. Even though only a few researchers empirically investigated whether audit quality and debt financing are related to earnings management, there have been other studies that assume that such an association occurs. For example, Lin and Hwang (2010) specified that audit quality has a significant negative association with earnings management, while Arens, Beasley, and Alvin (2010), and Messier, Glover, and Prawitt (2008) contended that the audit function helps to alleviate the information asymmetry and conflict of interest that occur amid shareholders and managers. On the other hand, Pope (2003, p. 281) stated that “the balance between debt and equity financing will produce demands for accounting information and may explain differences in disclosure patterns”. Likewise, O’Brien (1998, p. 1253) postulated that “if financial reporting exists to serve the needs of external capital providers, then we should expect differences to coincide with differences in the arrangements for providing capital”.