The Effect Of Auditor Industry Expertise On Real Earnings Management

The investors,governments and other stakeholders focus a lot on the reliability of listed company's information,however managers usually adjust the information because of various motives,which will harm investors and other stakeholders.The Earnings Management can reflect the accounting information of listed companies.Scholar divided Earnings Management into real earnings management and accrual-based earnings management.The real earnings management is hard to be recognized,so managers like to apply accrual-based earnings management to adjust financial information when external supervision become severe.Not only real earnings management but also accrual-based earnings management both reduce the reliability of listed company's information and harm investors and other stakeholders which hinder construction of a harmonious and orderly securities market for our country.The financial information of the listed companies should be audited by auditors,therefor it is important that auditors can recognize the Earnings Management.AICPA issued industry guidance on special audit and instructed the training of audit specialists with industry knowledge.China Association of Certified Public Accountants also encouraged auditor of our country to expand.Currently,the auditors of our country have became bigger and bigger,the will develop industry expertise to become outstanding.In this case,this paper want to study the relevance between auditor industry expertise and real earnings management.This paper reviews the theory of earnings management and auditor industry expertise.