Surplus Free Cash Flow and Earnings Management: The Moderating Role of Auditor Size

Subject Areas : Financial Accounting

Ahmad  Abdollahi ¹ (Faculty member of Department of Accounting, Golestan Institue of Higher Education. Gorgan. Iran.)
Yasser  Rezaei Pitenoei ² (Assistant Professor of Accounting, University of Guilan, Rasht, Iran.)

Received: 2019-01-19 Accepted : 2019-04-07 Published : 2020-01-01

Keywords: Earnings Management, Auditor Size, Surplus Free Cash Flow,

Abstract :

This Study seeks to scrutinize whether surplus free cash flow is correlated with earnings management, if auditor size moderates this relationship. To do so, modified Jones discretionary accrual model (1995) and audit firm size are used as audit quality indicator to measure earnings management. The research hypotheses are built upon a sample of 103 companies listed on the Tehran Stock Exchange during the years 2013 to 2017 and then tested using multiple regression model based on panel data techniques. The results reveal that earnings management is significantly associated with surplus free cash flow. Furthermore, the findings confirm that auditor size exerts no significant impact on the relationship between surplus free cash flow and corporate earnings management.

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