The Effect of Audit Quality to Earning Management and Investor Perspective

• In Event: Auditing/Government & Nonprofit

Abstract

This research aims to give empirical evidence about the effect of audit quality to earning management and investor perspective on firms audited by big 4 Public Accounting Firm (PAF) compared to firms audited by second tier PAF. Unlike prior researches, this research considers characteristics of the firm audited by the two types of auditors. Regression was done based on sample for non financial industries that selected by using propensity-score matching for the period 2008 until 2010.
The result shows there is no differences on audit quality between big 4 and second tier Public Accounting Firm in limiting earning management measured by discretionary accrual and investor perspective that measured by cost of equity.

Keywords:
Audit Quality, Discretionary Accrual, Cost of Equity, Big 4 and Second Tier Accounting Firm .

Authors

• Annisa Harini, Universitas Indonesia

• Vera Diyanty, Universitas Indonesia

• Akhmad Syakhroza, Universitas Indonesia