Earnings management, Audit fees and abnormal tone of language in managers' reports

Subject Areas :

Mahdi saghafi ^{1 *} , AliAkbar Nonahal Nahr ² , Azam Pouryousof ³

1 - Assistant Professor, Department of Accounting, Payame Noor University, Iran
2 - Assistant Professor, Department of Accounting, BostanAbad Branch, IAU, BostanAbad, Iran
3 - Assistant Professor, Department of Accounting, Payame Noor University, Iran

Received: 2023-08-27 Accepted : 2024-10-28 Published : 2024-12-28

Keywords: Agency theory, Profit management, Managers&#039, abnormal language tone, Audit fees, Activity reports (descriptive) of managers.,

Abstract :

Based on the agency theory, managers' personal interests and trying to cover the obtained poor performance can impose direct and indirect agency costs on companies. Therefore, it is expected that the managers of the companies that have tried to manage profits, in order to influence the users of information, change the tone of the language of their explanatory reports and in this way reduce the auditors' fees. Place the beam. The aim of the present study is to investigate the mediating role of managers' abnormal tone of language in relation to profit management and normal and abnormal audit fees. The time period of this research is8 years(2014-2021) and includes 944 observations. Research hypotheses have been investigated using multiple regression with control of year and industry fixed effects and Sobel test. The findings of the research show that the existence of profit management increases the motivation of managers to use an abnormal tone in the activity reports of the board of directors. Also, the tone of the abnormal language used in the (explanatory) activity reports of the board of directors also has a direct and significant relationship with the increase in the auditors' normal and abnormal fees. In addition, profit management has had a positive and significant effect on auditors' fees, both normal and abnormal. In this way, the tone of the abnormal language of the (explanatory) activity reports of the board of directors can play a mediating role in the relationship between profit management and normal and abnormal audit fees.