Relationship Between Real Earnings Management And Audit Opinions

There are many different classification standards for earnings management,which according to various embodiments can be divided into accrual earningsmanagement and real earnings management into two categories. With accountingsystem reform and increasingly stringent regulatory environment, as opposed to ameans to manipulate the way the accounting accrual earnings management, corporatemanagement is more popular in the use of more flexible and concealment of realearnings management to earnings manipulation. In order to achieve specific businessobjectives, management in the implementation of real earnings management, realstructure often used to regulate trading activities surplus, which deviate from thenormal business transactions to manipulate the trajectory of enterprises, so will theenterprise a large impact on the current operating cash flow. Real earningsmanagement weaken the company’s competitiveness and reduce the company’s futureoperating results, the impact to the enterprise value of the impairment caused by moreserious and widespread, causing widespread concern and research experts andscholars. At the same time, the audit pressures faced by CPA also due to this new wayof earnings manipulation becomes larger. Under the market economy, the independentthird party audit is an integral part of market control mechanism, on the one hand helpto improve the efficiency of capital markets operation, on the other hand to protect theorderly operation of the market economy as a whole, has been the social consensus.But "Lam shares","purple Xin Pharmaceutical,""Hail hygiene" and frequentexposure audit failure, making the CPA has been strongly condemned from creditors,investors and the government, reducing the public’s trust in CPA sense, the role of theaudit are deeply skeptical. Especially after the announcement of the new accountingstandards, accrued earnings management can manipulate space management graduallycompressed, the Company’s management sales tend to be abnormal, the abnormalproduction costs and abnormal discretionary means for manipulating real earningsmanagement. Faced with greater flexibility and concealment of real earnings management, is currently in a healthy state audit ability to effectively identify,recognize the true extent to which earnings management in different ways, hasbecome a research center point of this article.This paper explains the background and significance of research methods andideas related to earnings management and related literature review and audit opinionsafter the theoretical basis, by selecting the2011-2013A-share listed company’sexperience empirical research data and the overall level of audit opinions were thetrue relationship between earnings management and identify the extent of abnormalsales, abnormal production costs and abnormal discretionary manipulation of threeinstruments. First, we use the foreign scholars Roychowdhury (2006) research, salescontrol, production control and manipulation of discretionary costs were calculated,and the use of the three actual values deviate from the normal value, and build a truemeasure of earnings management of listed companies degree model. By logisticregression analysis of the relationship between real earnings management and theoverall level of audit opinion. Then, three means (sales manipulation, controlproduction costs and discretionary costs manipulation) were implemented realearnings management company from the sample CPA further investigated thesensitivity of the different means of manipulating real earnings management. Theempirical results show:(1) audit opinion to identify real earnings managementbehavior, and the higher the level of real earnings manipulation, the greater are thechances of audit opinions issued by non-standard;(2) CPA for different ways ofmanipulating the real earnings management identify different sensitivity, abnormaldiscretionary costs relative terms, the CPA for sale and abnormal production ofabnormal means for manipulating real earnings management is more sensitive, caneffectively identified. Finally, combined with our current audit market, corporategovernance environment and CPA professional capacity, on how to improve thequality of CPA’s audit practice better in order to identify the earnings management oflisted companies put forward some policy suggestions.