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.

Earnings management är ett fenomen som enligt studier har ökat i omfattning under senare tid tack vare förändringar av redovisningsprinciper. Detta har gett företag möjligheten att med ökad subjektivitet bedöma värdet på sina tillgångar, vilket kan utnyttjas för att manipulera redovisning och justera resultat i önskad riktning. Den här studien syftar primärt till att undersöka om det finns ett samband mellan variablerna earnings management och pressade resultat bland de noterade bolagen på Nasdaq OMX Stockholm, även kallad “Stockholmsbörsen”. Det sekundära syftet är att undersöka om detta eventuella samband är vanligare förekommande bland mindre företag samt om någon bransch är överrepresenterad. En kvantitativ metod har använts där data från bolagens årsredovisningar har hämtats och sedan granskats. Efter det har en analytisk generalisering gjorts av resultaten som visar på att företag i större utsträckning tenderar att bedriva earnings management under perioder där de upplever pressade resultat, i motsats till perioder där de upplever normala resultat. Studien visar också att detta inte är vanligare förekommande på någon speciell börslista eller inom någon specifik bransch, utan att företagen är representerade i likvärdig utsträckning. I studien visade det sig att ett vanligt verktyg för att bedriva earnings management är att göra stora engångsnedskrivningar av goodwill. Detta möjliggjordes år 2005 då IFRS 13 infördes i EU, vilket resulterade i att goodwillposten årligen nedskrivningsprövas istället för att som tidigare avskrivas planmässigt. En kritisk diskussion förs med slutsatsen att resultaten är delvis applicerbara på den studerade populationen och säger något om närliggande fall. Slutligen diskuteras studiens bidrag där konklusionen är att resultaten adderar till samt stärker tidigare forskning. / Earnings management is a phenomenon whose scope of usage has expanded in recent time due to changes in accounting principles, according to studies. These changes have given companies the possibility to use subjective judgment to a higher degree when valuing their assets. This can be utilized to manipulate accounts and tweak results in desired direction. The purpose of this study is primarily to investigate if there is a connection between the variables earnings management and pressured results among the listed companies on Nasdaq OMX Stockholm, also knowned as “Stockholmsbörsen”. The secondary purpose is to investigate if this possible connection is more common among smaller companies and if there is any industry that is overrepresented. A quantitative method has been used where data has been collected from the companies’ websites and later reviewed. An analytic generalization has then been applied on the results that show that companies tend to engage in earnings management in greater magnitude when they are experiencing times with pressured results, in contrary to when they experience times with normal results. The study also shows that it’s not more commonly practiced on any particular stock market list or in some particular industry. The companies are rather equivalently represented along the scope of industries and stock market lists. The study shows that a common tool to engage in earnings management is to make big one time impairments of goodwill. This was made possible 2005 when IFRS 13 was implemented in the EU, which resulted in that the goodwill account where to be impairment tested every year instead of the former principle that used linear depreciation. A critical discussion is held with the conclusion that the results of the study are partly applicable on the studied population and says something about nearby cases. Finally there is a discussion about the contribution of the study with the conclusion that the findings adds something to and strengthens past findings.

本益比有資訊內涵存在 (Basu , 1977)，為投資人做投資決策時所廣泛使用。Lev (1992) 認為，本益比發生變動，或是公司本益比與產業平均數存在持續性差異，即顯示公司價值有錯誤評價之可能，因此，本研究將樣本分為三組，透過迴歸分析探討83年至90年間上市公司中，本益比持續性地高於（低於）產業平均數的公司，是否進行盈餘管理，以及相較於其他公司，其盈餘持續性與價格攸關性如何。研究結果發現，本益比持續性地高於產業平均數的公司，其盈餘管理行為並不明顯；本益比持續性地低於產業平均數的公司，確實會進行盈餘管理，使得盈餘持續性較差，但有較好的盈餘價值攸關性。 / There are information in Price-Earnings（PE） ratio so that many investors use it for making decisions. Changing in PE ratio , or PE ratio different from the average of industry over time ,will suggest to managers the possibility of misvaluation. Therefore, the study divides the samples to three parts, using regression analysis to investigate if the firms with PE ratio continuously higher (or lower) than the industry average number will use managerial discretion to proceed earnings management. Besides, comparing to other firms, the two sample companies will have what kinds of characteristics of earnings . The result indicate that the firms with PE ratio higher than industry average number, their earnings management behavior is not obvious. On the contrary, the firms with PE ratio lower than industry average number indeed proceed earnings management, inducing worse earnings persistence and better value relevance of earnings.

Mini study project (MBA)--University of Stellenbosch, 2005. / ENGLISH ABSTRACT: This mini study project aims to investigate the prediction value ofpricelearnings (pIE) ratios. The ability of investors to predict earnings growth is tested by examining the relationship between PIE ratios and excess earnings growth. The study further also investigates the relationship between PIE ratios and two other variables: share returns and dividend yields. The study design was based on that of two other studies: Fuller, Huberts and Levinson (1993) and Hamman, Jordaan and Smit (1995). These studies specifically tested the random walk theory of earnings. In this study all the companies were allocated to one of four PIE portfolios according to the magnitude of their PIE ratio. The relationship between PIE ratios and the dependent variables (earnings growth, share returns and dividend yields) was then analysed by comparing the medians of the dependent variables of the different quartiles (pIE portfolios). The investigation into the relation between PIE ratios and excess earnings growth indicated that companies with high PIE ratios tend to have higher excess earnings growth. The relationship, however, seemed to be more pronounced in the one year results than in the two and four year results. The share returns seemed to be randomly distributed and it was more difficult to identify the correlation with PIE ratios. For a two and four year period however, the lowest PIE quartile delivered the highest returns and the highest PIE quartile performed very poorly. Lastly it was found that companies with high PIE ratios had lower dividend yields and companies with lower PIE ratios had higher dividend yields. Even though some departures from randomness were observed when comparing the PIE quartiles, the variability of the dependant variables at individual stock level was high and indicated random distribution. / AFRIKAANSE OPSOMMING: Hierdie ministudieprojek het ten doelom die voorspellingvermoë van prys/verdienste (PN) verhoudings te ondersoek. Die vermoë van beleggers om winsgroei te voorspel word getoets deur die verwantskap tussen PN-verhoudings en surplus winsgroei te ondersoek. Verder ondersoek die studie ook die verwantskap tussen PN-verhoudings en twee verdere veranderlikes: aandeelopbrengste en dividendopbrengste. Die ontwerp van die studie is gebaseer op dié van twee ander studies: Fuller, Huberts en Levinson (1993) en Hamman, Jordaan en Smit (1995). Die twee studies het spesifiek die ewekansige verspreiding van winste ondersoek. Alle maatskappye in hierdie studie is geallokeer aan een van vier PN-protefeuljes volgens die vlak van hulle PNverhouding. Die verwantskap tussen PN-verhoudings en die afhanklike veranderlikes (winsgroei, aandeelopbrengste en dividendopbrengste) is dan ondersoek deur die mediane van die afhanklike veranderlikes van die verskillende PN-kwartiele (portefeuljes) te vergelyk. Die analise van die surplus winsgroei het aangedui dat maatskappye met hoë PNverhoudings geneig is om beter surplus winsgroei te toon. Die verwantskap blyk egter om duideliker te wees vir 'n eenjaar-periode as vir 'n tydperk van twee of vier jaar. Die aandeelopbrengste het 'n ewekansige verspreiding getoon en dit was moeilik om 'n verwantskap met die PN-verhoudings te identifiseer. Vir 'n twee en vier jaar periode het die laagste PN-kwartiel die hoogste aandeelopbrengs gelewer en die hoogste PNkwartiel het baie sleg presteer. Laastens is daar gevind dat maatskappye met hoë PN-verhoudings laer dividendopbrengste gelewer het en maatskappye met lae PN-verhoudings hoë dividendopbrengste. Alhoewel afwykings van ewekansigheid geïdentifiseer is met die vergelyking tussen kwartiele, was die variansie van die afhanklike veranderlikes op individuele aandelevlak hoog en het gedui op 'n ewekansige verspreiding.

Ao longo da última década, tem aumentado o reconhecimento de medidas de gerenciamento de valor. Dentre essas, uma que tem recebido grande atenção tanto no meio acadêmico quanto nas empresas em geral é o valor econômico agregado (EVA®). Muito se tem discutido sobre essa medida, sendo que seus defensores afirmam que ela é uma melhor medida de desempenho do que as medidas contábeis tradicionais. Nessa perspectiva, uma série de pesquisas tem sido realizada, verificando a relação entre o EVA® e o retorno de ações, onde os resultados alternam-se entre uma relação superior dessa medida e o retorno de ações em comparação com as medidas contábeis tradicionais e uma fraca relação ou a ausência de relação entre essas variáveis. Em diferente abordagem, Machuga, Pfeiffer Jr. e Verma (2002) realizaram um estudo no mercado norte americano para verificar a capacidade do EVA® na predição de lucros futuros. Replicando a metodologia desse estudo, esta pesquisa teve como objetivo verificar empiricamente se o EVA® fornece informação incremental para predição de lucros futuros das empresas de capital aberto do Brasil. Na metodologia, foram aplicados modelos de regressão linear múltipla no período de 1998 a 2006 para testar a proposição de que o EVA® fornece informação incrementalmente útil para predizer lucros de um ano adiante das empresas de capital aberto do Brasil. Foram aplicadas regressões anuais (crosssection) e verificou-se a significância estatística dos coeficientes médios. Com os resultados obtidos, não se pode comprovar a utilidade incremental do EVA® na predição de lucros futuros. Na seqüência, realizou-se um teste do valor incremental da inclusão da informação EVA® no modelo de predição, sendo que foram aplicadas novas regressões sem as variáveis EVA® e apurados os novos coeficientes médios; em seguida, foram efetuadas duas previsões de lucros, uma utilizando os valores médios com e outra sem o EVA® . Por meio da comparação desses valores previstos com os reais dos lucros e apurando suas respectivas diferenças, obteve-se os erros médios de previsão. Foi observado que os erros médios de previsão apresentaram-se elevados em função da alta dispersão das variáveis da pesquisa, também foi encontrado que os erros médios de previsão foram menores quando houve a inclusão da informação do EVA® , indicando a utilidade incremental dessa medida na predição de lucros futuros, entretanto esses resultados devem ser interpretados como indicativos e não como conclusivos, já que os coeficientes das variáveis, em sua maioria, não se demonstraram estatisticamente significantes. / There has been increased recognition over the last decade of the measures of management of value. Among these, one that has received the great attention either on the academic field or in the companies in general is the Economic Value Added (EVA®). A lot has been argued about this measure, its defenders affirm that it is one measure of performance better than the traditional accounting measures. In these perspective, a lot of researches have been done, verifying the relation between the EVA® and the stock returns, where the results change between one relation superior of these measures and the stock returns in comparison with the usual accounting measures and a weak relationship or absence of relation between these variables. In a different approach, Machuga, Pfeiffer Jr. and Verma (2002) realize a study on the North America market to verify the ability of EVA® in the prediction of future earnings. Applying the methodology of this study, this research had as goal to verify empirically if the EVA® supplies incremental information to predict future earnings of the Brazilian public companies. After, in the methodology, some multiple linear regression models were applied on the period of 1998 to 2006 to test the proposition that EVA® supplies information incrementally useful to predict one-year-ahead earnings of the Brazilian public companies. The annual cross-section regressions were applied and verified the statistic significance of the average coefficients. With the gotten results, one cannot confirm the incremental utility of EVA® in the future earnings prediction. In the sequence, a test of the incremental value of the inclusion of the information EVA® on the model of prediction was realized, it being that news regressions were applied without the variables EVA® and gotten the new average coefficients, after that, two predictions of earnings was effected, one using the mean values with and the other without the EVA® information. By the comparison of the predicted values with the actual earnings and checking its respective differences, one got the average forecast errors. It was observed that the average forecast errors had been presented high in function of the high dispersion of the variables of the research. It was founded too that the average forecast errors were lower when was included the information of EVA®, indicating the incremental utility of this measure on the prediction of future earnings, however, these results must be interpreted as indicative and not as conclusive, since the coefficients of the variables, in its majority, did not show statistically significant.

Det är genom den finansiella redovisningen som företag redogör för sina prestationer. Företag eftersträvar att redovisa höga vinster i syfte att värna om relationen till intressenter, vilken är relaterad till finansiell information. Earnings management utgör ett verktyg för att styra redovisad information i önskad riktning. Det bidrar till snedvridning och minskad trovärdighet för den finansiella rapporteringen.Dåvarande ordförande för U.S. Security and Exchange Commission, Arthur Levitt, uttrycker att earnings management är problematiskt, det försämrar kvaliteten på redovisat resultat och finansiella rapporter. Earnings management innebär ett utnyttjande av bedömningsutrymmen i syfte att manipulera den finansiella informationen. En redovisningspost som skapar tillfälle för företeelsen är avsättningar, vilka baseras på bedömningar. Avsättningar kan övervärderas för att skapa utrymme för framtida återföring, med avsikt att öka redovisat resultat. Av tidigare forskning framgår att återföring av avsättningar används mer frekvent när företag redovisar ett negativt resultat. Det har även konstaterats att företag återför avsättningar för att nå upp till förväntningar eller för att undvika att rapportera nedgång i vinster.Syftet med studien är att, inom ramen för earnings management, studera effekter av när företag på Nasdaq OMX Stockholm Large Cap återför avsättningar. Detta med fokus på företagens resultat samt måluppfyllelse. I studien är relationen mellan redovisat resultat och återföring av avsättningar central. Det undersöks huruvida avsättningar återförs, antingen för att undvika att redovisa ett förlustresultat eller för att nå upp till vinstmål. Det ska mynna ut i en slutsats om huruvida earnings management förekommer. Tidigare forskare har uttryckt ett behov av denna sortens studie, då det finns få empiriska studier där återföring av avsättningar granskas med koppling till earnings management.Studien har en deduktiv ansats och en kvantitativ metod har tillämpats för att besvara forskningsfrågorna. Datamaterialet utgörs av 222 stycken årsredovisningar under tidsperioden 2010-2015. Relevant finansiell information har hämtats ur dem för att testas och vidare analyseras. Datamaterialet har testats genom statistiska sambandstest och dess resultat analyseras med hjälp av tidigare forskning och studiens teoretiska referensram. Den teoretiska referensramen utgörs av positiv redovisningsteori, systemorienterade teorier och designad redovisning.Studien resulterar i ett enhetligt svar på forskningsfrågorna. Svaren indikerar på att earnings management genom återföring av avsättningar inte förekommer på Nasdaq OMX Stockholm Large Cap. Resultatet skiljer sig från tidigare forskning. / The financial statements are meant to convey the performance of a company. Companies strive to report high profits in order to safeguard their relationships with stakeholders, which are related to the financial information. Earnings management represents a tool for controlling reported information in a desired direction. It contributes to distortion and reduced credibility of the financial reporting.Former chairman of the U.S. Security and Exchange Commission, Arthur Levitt, states that earnings management is problematic, it’s causing an erosion in the quality of reported earnings and the financial reports. Earnings management involves the use of discretion in order to manipulate the financial information. Provisions, which are based on estimates, create an opportunity for the phenomenon. Provisions can be overstated to provide reserves for future reversals, with the intention to increase reported earnings. Prior research shows that reversals are used more frequently when companies report a loss. It has also been stated that companies use reversals to meet forecasts or to avoid reporting a decline in profits.The purpose of this study is to examine, in the context of earnings management, effects of reversal of provisions on Nasdaq OMX Stockholm Large Cap. This while focusing on reported earnings and earnings targets. Central for this study is the relationship between reported earnings and reversals. It is examined whether provisions are reversed in order to avoid to report a loss or with the aim to reach an earnings target. This will appear in a conclusion whether earnings management occurs or not. Prior researchers have expressed a need for this kind of study, as there are few empirical studies in which reversal of provisions, in the context of earnings management, is examined.The study has a deductive approach and a quantitative method has been applied in order to answer the research questions. The data material consists of 222 annual reports during the period 2010-2015. Relevant financial information has been collected from the annual reports in order to be investigated and analyzed. The data has been tested through statistical correlation tests and the results are analyzed using prior research and the theoretical framework. The theoretical framework consists of positive accounting theory, systems-oriented theories and designed accounting. The study results in a uniform answer. The answers indicate that earnings management through reversal of provisions does not occur on the Nasdaq OMX Stockholm Large Cap. This result is not consistent with prior research.This thesis is written in Swedish.

Emerging research on real earnings management [REM] has expressed the concern that firms deviating from normal business practices may endure a negative impact on future cash flows and performance. This dissertation (in three essays) investigates the phenomenon of real earnings management in its association with: 1) enterprise resource planning systems [ERPs]; 2) audit report lags [ARLs]; and 3) future firm performance. In the first investigation I hypothesize that the increased monitoring associated with the implementation of an ERP will result in a decline in REM. In the second investigation I hypothesize that higher levels of REM will evoke greater auditor scrutiny and be associated with longer ARLs. In the third investigation I hypothesize that managerial actions that would ordinarily be classified as REM: reductions in discretionary expenditures or overproduction, are not REM but indicative of enhanced efficiencies when found in concert with prior period restructurings or expected future sales growth respectively. In each of the three investigations, my hypotheses are confirmed.

The study examined the momentum in the fundamentals of companies over time, and whether the information content in the momentum of the fundamentals improved the understanding of the long-standing price momentum and earnings momentum anomalies on the Johannesburg Stock Exchange (JSE). Fundamental momentum is defined as the difference between the change of a fundamental variable over consecutive time periods. The study included all industrial companies that were listed on the JSE between the period January 1990 and December 2013. The purpose of the study was to investigate whether price momentum or earnings momentum was subsumed by fundamental momentum. Price momentum and earnings momentum are long-standing anomalies that have been widely researched, yet no definitive explanation has been provided in the literature. The objective of the study was to improve the understanding of price momentum and earnings momentum through the analysis of fundamental momentum. The study also provided insight into the persistence of fundamental momentum of earnings. The study tested the profitability of the price momentum, earnings momentum and the fundamental momentum of earnings trading strategies. The research hypotheses were formulated and tested using equal-weighted sort analysis. The sustainability of fundamental momentum of earnings was also analysed. The size and value risk factors were taken into account to ensure that the results were not influenced by such risk factors. The Fama and French three-factor model was employed to test whether the results captured one of these risk effects. The fourth research question investigated whether the fundamental momentum of an underlying component of earnings increased the persistence of the fundamental momentum of future earnings. Earnings were shown to be mean reverting over time, and therefore, the expectation was that positive or negative fundamental momentum of earnings was not sustainable over a prolonged period of time. However, by decomposing earnings into the accrual and cash flow components, and their respective sub-components, the study undertook regression analysis to see whether a specific component of earnings could improve the sustainability of fundamental momentum. The final research question tested whether price momentum and/or earnings momentum was subsumed by fundamental momentum. Two-way analysis was conducted to test whether the strategies captured similar effects. Sort analysis was used by first constructing equal-weighted portfolios based on either price momentum or earnings momentum. Each portfolio was then further subdivided based on the fundamental momentum of earnings. The profitability of the resultant portfolios was then compared with the initial portfolio. The results confirmed that the price momentum and earnings momentum anomalies were present on the JSE for the sample selected for the study. The fundamental momentum of earnings trading strategy was also shown to be a profitable trading strategy for the extreme quintile portfolios. Using the Fama-MacBeth regression methodology, size and value effects were not found to impact the results across all three momentum strategies. A behavioural overreaction or underreaction hypothesis was argued to explain the profitability of the fundamental momentum of earnings strategy. The market was shown to anticipate the earnings surprise that resulted in earnings momentum up to 12 months prior to portfolio formation. Similarly, the market anticipated fundamental momentum of earnings 12 months prior to the earnings announcement. The fundamental momentum of future earnings was shown to be more sustainable when the fundamental momentum of the cash flow component of prior earnings was higher than the fundamental momentum of the accrual component of prior earnings. This result did not give insight into the nominal size effect of the underlying earnings components, rather, it only gave insight into the rates of change of the earnings components. The final result of the study showed that price momentum and fundamental momentum captured different effects. However, the earnings momentum and fundamental momentum results were not as clear cut. Both strategies used a variant of earnings to construct the quintile portfolios and thus it was very plausible that they captured a similar effect. The study contributed to the current literature in a number of ways. A new trading strategy based on the fundamental momentum of earnings was tested. Fundamental momentum of earnings as a trading strategy has yet to be defined; as a result, it has not been researched prior to this study. Given the results, it may be seen as a derivative of earnings momentum. Understanding the sustainability of fundamental momentum of future earnings was also researched. The final contribution of the study was the two-way analysis of price momentum and fundamental momentum, and earnings momentum and fundamental momentum. / Thesis (PhD)--University of Pretoria, 2016. / tm2016 / Financial Management / PhD / Unrestricted

No description available.

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.