In 2005, international accounting standards changed the treatment of goodwill, by replacingannual amortisation with impairment tests of goodwill. This has created a heated debate inaccounting research. Scholars are split whether the switch to impairment tests have increasedor decreased both accounting and audit quality. The subjective nature of impairment tests,deriving from being based on fair values and estimations have resulted in a rise of studiescovering its potential shortcomings.Main issues with impairment tests have been related to its possible impact on increase inearnings management (EM) engagement, dependence on estimations and discretionaryproblems. There are many surrounding questions regarding goodwill and EM, along with thecurrent goodwill rules being subject to criticism. This study aims to investigate further therelationship between goodwill and EM, as well as exploring the perception auditors haveregarding that topic and the related accounting standards. Moreover, we aim to get a betterunderstanding about the role the auditor possesses in both enabling and preventing EMactivities in private firms and public firms.Following a qualitative approach, this study explores previous literature within the field ofgoodwill and EM in addition to using 7 in-depth and semi-structured interviews withprofessionals in the audit industry based in Sweden and Luxembourg. Overall, we find auditorsto clearly be in favour of impairment tests compared to using amortisation of goodwill. Inregards to the risk of EM, the potential benefits of impairment tests outweigh the subjectiveissues according to the interviewed auditors. Furthermore, it seems like the verifiabilityproblem of impairment tests is more an issue in theory than in practice. The majority of theauditors believes the introduction of impairment tests of goodwill increased the accountingquality and did not significantly impact the audit quality, even if it gives auditors morechallenges in the audit tasks. In addition, the importance and prevalence of EM within goodwillbetween private and public firms had inconclusive results between the interviewees. Furtherresearch may investigate using a larger sample whether impairment tests are at the origin of anincrease of EM and comparing private and public firms.

The world has witnessed a series of corporate accounting scandals. Earnings management, as a phenomenon at the core of these scandals, is one of the main challenges confronting the effectiveness of different monitoring mechanisms such as corporate governance. Recently, and more precisely after the financial crises of 2008 2009, Jordan has shown substantial interest in integrating the pillars of corporate governance. Therefore, this research examines the effect of corporate governance mechanisms on earnings management activities among all publicly listed commercial banks on the Amman Stock Exchange (ASE) during the period 2013-2018. Earnings management was measured by the modified Jones’ model. The characteristics examined are board size, CEO duality, board independence, managerial ownership, institutional ownership, audit committee size, audit committee independence and audit committee activity. In addition, two control variables have been used: firm size and firm performance. The findings of the study reveal that earnings management has a significant positive relationship with both board size and institutional ownership, and a significant negative relationship with total assets.

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Det finns en osäkerhet kring goodwillnedskrivningar i och med det finns utrymme för företagsledningen att påverka antagandena för goodwillvärdet med företagsledningens egna uppskattningar och subjektiva bedömningar. Mycket av forskningen som förklarar varför goodwillnedskrivningar genomförs har inte gjorts i en svensk kontext. Studiens syftet är att undersöka om svenska börsnoterade företags goodwillnedskrivningar kan förklaras av att företagsledningen har använt Earnings Management. Metoden studien använde var en kvantitativ forskningsstrategi med en deduktiv ansats. Studien har sekundärdata i form av årsredovisningar från företag noterade på Stockholmsbörsen använts. Studiens resultat stödjer endast  skuldsättningshypotsesen som är grundad i PAT. Goodwillnedskrivningar i Sverige kan därmed förklaras utifrån vilken skuldsättningsgrad företag har. Det leder till att goodwillnedskrivningar kan delvis förklaras av ett opportunistiskt beteende. Detta stöds även av kontrollvariablerna ROA och GW/TT. De övriga sex hypoteser förkastas eftersom de inte kan förklara genomförandet av goodwillnedskrivningar i Sverige under 2018–2021. Studiens kunskapsbidrag är att öka förståelsen kring vilka faktorer som kan förklara goodwillnedskrivningar under räkenskapsåren 2018–2021.

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Syfte: CSR är ett högaktuellt och viktigt ämne för företagen och deras intressenter. Då högre CSR- aktiviteter anses vara relaterat till etiskt agerande företagsledningar undersöker studien om företagens ledningar utnyttjar detta i försök att dölja omoraliska aktiviteter i form av earnings management. En opportunistiskt agerande företagsledning använder earnings management för att manipulera resultatet i önskad riktning, vilket kan göras genom diskretionära periodiseringar (AEM) eller via aktiviteter som påverkar kassaflödet (REM). Eftersom dessa fungerar som substitut så undersöks båda i studien. Studien baseras på kontinentaleuropeiska bolag där rättstillämpningen bygger på civil law. Dessa företag redovisar enligt IFRS och CSR-rapporterar efter GRI, vilket tidigare forskning pekat ut som faktorer som påverkar sambandet mellan CSR och earnings management. Syftet med studien är därför att undersöka om CSR används som ett medel för att dölja förekomsten av earnings management, samt om det finns stöd för ett opportunistiskt alternativt etiskt perspektiv. Metod: Studien har en kvantitativ forskningsmetod och tillämpar en positivistisk forskningsfilosofi med en hypotetisk-deduktiv ansats. Studien använder en tvärsnittsdesign med sekundärdata från kontinentaleuropeiska bolag över en tioårsperiod (2008-2017). Datan har hämtats från Thomson Reuters Datastream och analyserats i IBM SPSS. Resultat & slutsats: Resultaten indikerar att kontinentaleuropeiska företag agerar opportunistiskt och möjligtvis använder CSR i försök att dölja earnings management. Detta kan dock endast härledas till REM-aktiviteterna abnorma kassaflöden och abnorma produktionskostnader. Mellan CSR och AEM kunde inget samband redogöras. Därav dras slutsatsen att det är viktigt att earnings management studeras utifrån båda aspekterna för att erhålla ett rättvisande resultat. Examensarbetets bidrag: Studien bidrar till att fylla forskningsgapet gällande sambandet mellan CSR och earnings management i form av både AEM och REM. Resultaten är viktiga för företagens intressenter då de tyder på att högre CSR-engagemang inte är relaterat till mer etiskt agerande företagsledningar. Intressenterna bör främst vara vaksamma på aktiviteter som inte granskas av revisorer då dessa visats förekomma i högst utsträckning. Förslag till fortsatt forskning: I framtida studier kan sambandet mellan CSR och earnings management undersökas i företag där incitament till resultatmanipulation anses föreligga. Vidare kan ledningens syn på earnings management studeras mer ingående. Förslag ges även till att undersöka branschskillnader och att använda alternativa CSR-mått. / Aim: CSR is a highly topical and important subject for the companies and their stakeholders. Since higher CSR activities are considered to be related to ethically acting managements, this study investigates whether the management uses CSR as an attempt to conceal immoral activities in terms of earnings management. An opportunistic acting management uses earnings management to manipulate the result in the desired direction, which can be done through discretionary accruals (AEM) or through activities that affect the company’s cash flow (REM). Since these operates as substitutes, both are examined in the study. The study is based on Continental European companies where the application of law is based on civil law. These companies report according to IFRS and CSR reports according to GRI, which previous research pointed out as factors to affect the correlation between CSR and earnings management. The purpose of the study is therefore to investigate whether CSR is used as a means of concealing the existence of earnings management, and whether there is support for an opportunistic alternative ethical perspective. Method: The study has a quantitative research method and applies a positivistic research philosophy with a hypothetical-deductive approach. The study uses a cross-sectional design with secondary data from Continental European companies over a ten-year period (2008-2017). The data has been retrieved from Thomson Reuters Datastream and analyzed in IBM SPSS. Result & Conclusions: The results indicate that Continental European companies act opportunistically and uses CSR in attempts to hide earnings management. However, this can only be attributed to the REM activities abnormal cash flows and abnormal production costs. No relationship could be reported between CSR and AEM. Hence, it is concluded that it is important to study earnings management on the basis of both aspects to report fair results Contribution of the thesis: The study contributes to filling the research gap regarding the relationship between CSR and earnings management in both AEM and REM. The results are important for companies' stakeholders as they indicate that higher CSR involvement is not related to more ethical behavior of the company management. Stakeholders should primarily be vigilant on activities that are not audited by auditors as these have been shown to occur to the greatest extent. Suggestions for future research: In future studies, the relationship between CSR and earnings management can be investigated in companies where incentives for manipulation the financial performance are considered to exist. Furthermore, the management’s view of earnings management can be studied more thoroughly. Suggestions are also made to investigate industry differences and to use alternative CSR measures.

The earnings game and myopic performance focus induce managers to use judgment and influence to alter the reported earnings. Earnings management is the umbrella term for such manipulative actions, by accruals management or real activates management. The implicit market reactions by the stock returns indicate the effect of EM and if the behaviors are opportunistic or informative for the stakeholders. Accounting variables explain less of the stock return variation and speculative short-term news drives the variation of stock return. Research Question: Can earnings management indicators improve the forecasting of stock returns? The main purpose of the study is to investigate whether EM can be utilized to forecast returns from improving the forecasting of earnings. The authors will include both AM and RAM measures to investigate the different inherent forecasting abilities, adding to the asset pricing research and valuation area. The authors aim to enhance the explanation of cross-sectional variation of stock returns from accounting variables. The authors aim to develop a model more specified to explain the future stock returns from the accounting relationships. An additional purpose is to include transactions with the firm (stock repurchases) to potentially increase the signaling value of the manipulation behaviors. The theoretical framework consists of a discussion of theories and empirical findings regarding the accounting characteristic and relationship with stock returns. Earnings management is explained in-depth along with the empirical findings related to the concept. The capital market perspective is explained by the efficient market and behavioral finance. The chapter is concluded by concepts explaining the relationship and explanations for earnings management and the impact of information. The sample consists of 3545 firms from NASDAQ and NYSE for the years 1992-2012, which equates to around 40 000 observations. We utilize 11 different EM indicators, constructed to capture abnormal components which indicate manipulative actions. The EM indicators’ association with future stock returns is tested by yearly and industry-yearly firm characteristics framework regressions. The firm characteristic framework is developed to control for firm characteristics and evaluate the standalone effect of EM. The result is expanded by investigating earnings persistence, correlations, robust regression and portfolio sorts. The results suggest that total accruals, discretionary accruals, unexpected core earnings, production cost and stock returns are associated with subsequent stock returns. Abnormal SG&A expenses, Abnormal R&D expenses and abnormal cash flows from operations are not associated with stock returns. Earnings are downward manipulated prior and during stock repurchases. The change in ATO and PM diagnostic captures AM but not RAM. The concluding remarks are that EM indicators are associated with future stock returns and improve the forecasting of stock returns via a more accurate forecast of earnings.

<p>I start with a sample of 26,998 CEOs from the Compustat Executive Compensation (ExecuComp) database starting January 1, 1991 and ending January 1, 2009. I then match the sample with the FAA’s Airmen Certification database using the CEO’s first name, middle initial, and last name. Names with a match are coded as pilots and names without a match are coded as non-pilots. Following Roychowdhury (2006) I remove all firms in regulated industries (SIC codes between 4400 and 5000) as well as banks and financial institutions (SIC codes between 6000 and 6500). The resulting sample consists of 255 pilot-CEOs and 3,935 non-pilot-CEOs. I then merge the CEO dataset to the Compustat Fundamentals Annual database to obtain a final sample consisting of 1,038 CEO-pilot firm-years and 18,455 CEO-non-pilot firm-years. All variables are winsorized at the 1% and 99% levels.</p><p><a></a> </p><div><br><div><p><br></p></div></div>

This research study investigates the relationship between ambiguity, litigation risk, and auditor decision-making. In addition, this study investigates how auditor trust of his or her client may change these relationships. It is important to investigate the relationships of ambiguity, litigation risk, and client trust to auditor decision-making because auditors face these factors on a regular basis. This research uses a 2x2 experiment to investigate auditor reaction to ambiguity and litigation risk. The first factor, ambiguity is operationalized as auditor reaction to potential real transaction earnings management (low ambiguity) and potential accrual transaction earnings management (high ambiguity). The second factor, litigation risk is operationalized through an income increasing (high) or income decreasing (low) earnings management attempt. Auditors were given company background information, selected account information, and comparative financial statements and then asked to state the likelihood of material misstatement in the financial statements as a whole and the sales, selling and marketing expenses, research and development expenses, and general and administrative expenses individual accounts. The ambiguity manipulation was imbedded in the description of the research and development account while the litigation risk factor was imbedded in the comparative financial statements. The findings indicate that the subjects reported a relatively high likelihood of material misstatement of research and development expenses regardless of the earnings management method. The findings further indicate that when a real earnings management transaction was present, auditors rated the likelihood of material misstatement in sales and the financial statements as a whole higher than when an accrual earnings management transaction is present. Additionally, when the subject group is limited to individuals working for Big-4 and National non Big-4 firms the auditors assessed the likelihood of material misstatement in the financial statements as a whole, sales, selling and marketing expenses, and general and administrative expenses significantly higher when a real earnings management transaction is present than when an accrual earnings management transaction is present. The lawsuit risk factor was not found to be significant in any of the primary analyses. The research also explores the relationship between an auditor's trust of the client and the likelihood of material misstatement assessment. Auditors completed the Kerler and Killough trust scale to measure trust of the experimental client. The findings report that as external auditor experience increases, auditor trust of the client decreases. However, this decrease in trust does not significantly affect the likelihood of material misstatement assessment. This research study is the first step in developing an understanding of the relationship between ambiguity, risk, trust, and auditor decision-making. The findings indicate that auditors do use information about potential earnings management in one account when evaluating the likelihood of material misstatements in other accounts. Future research should develop an understanding about whether auditors should take these factors into consideration in the planning stages of the audit. / Ph. D.

Ekonomiska kriser är incitament till ökad användning av earnings management på grund av företagens osäkra omvärld. Sambandet mellan earnings management och ekonomiska kriser varierar mellan att vara positivt eller negativt utan slutsatser om vad tidigare motstridiga resultat egentligen beror på. Institutionella och miljömässiga faktorer har visat sig spela roll i företagens tillämpning av earnings management. Syftet med studien är därför att undersöka om användningen av earnings management i olika marknadsekonomier påverkas under en kris. Studien finner inga samband mellan earnings management, ekonomisk kris och marknadsekonomier. Däremot visar studien ett signifikant samband mellan earnings management och marknadsekonomier. LME-länder uppvisar högre nivåer av earnings management än CME-länder. Studiens slutsats är därför att landspecifika egenskaper påverkar användningen av earnings management och förklaras av institutionell agentteori. Studien finner ett signifikant positivt samband mellan earnings management och företagsstorlek. Studien bidrar till forskningen genom att visa ett icke-existerande samband mellan earnings management och ekonomiska kriser. Studien kommer med en möjlig förklaring till tidigare motstridig forskning på området genom att visa på ett samband mellan marknadsekonomier och earnings management. / Economic crises are incentives for increased use of earnings management, due to companies’ uncertain environment. The relation between earnings management and economic crises varies between being positive and negative, without conclusions about what previous inconsistent results are actually due to. Institutional and environmental factors have shown to play a role in companies’ application of earnings management. The purpose of this study is therefore to examine if the use of earnings management in different market economies is affected during a crisis. This study does not show a relationship between earnings management, economic crisis, and market economies. However, this study shows a significant relationship between earnings management and market economies. LME countries show higher levels of earnings management than CME countries. The conclusion of the study is therefore that country-specific characteristics affect the usage of earnings management and is explained by the institutionalized agency theory. This study finds a significant positive relationship between earnings management and company size. This study contributes to existing literature by showing a non-existent relationship between earnings management and economic crisis. This study provides a possible explanation of previous contradictory research on this field by showing a relationship between market economies and earnings management.