Research On The Relationship Between Earnings Management,Audit Fees And Audit Opinions

Under the modern enterprise system,the separation of the "two rights" between ownership and management enables managers have the motivation and space to maximize their own benefit by using their unique information advantages.Earnings manipulation makes financial information can not reflect companies' real business situation,not only may mislead the investors' decision-making,but also can distort the allocation of social resources and impede the sound development of the capital market.External Audit is conductive to supervising the earnings manipulation of the enterprise.The public hopes that auditors can improve the quality of financial information and restrain the self-interest of the managers.By examining the relationship between firms' earnings management behavior and audit fees and audit opinions,this paper investigates whether auditors can effectively identify the earnings management behaviors of different ways of enterprises and issue corresponding audit opinions,and whether the audit services are priced according to different ways and degrees of earnings management.Using the data of China's A-share companies for the years 2007 to 2014,this paper empirically investigates the effects of earnings management on audit fees and audit opinions by constructing Probit regression and OLS regression models.I find that there is a significant positive relationship between accrual-based earnings management and audit opinions,indicating that firms with higher degree of accrual-based earnings management are more likely to get non-standard opinions from auditors.While the real earnings management has no significant impact on audit opinions,showing that due to the concealment and operational complexity of real earnings management,and it may be designed by managers deliberately and bypass the audit progress,real earnings management may not be easily perceived by auditors and fail to be reflected in the types of audit opinions.Further empirical evidence suggests that both accrual-based earning management and real earnings management have significantly positive correlation with audit fees.Audit pricing is the result of negotiation and bargaining between enterprises and auditors.Firms with more earnings manipulation usually have the motivation to "buy" audit opinions,thus they are willingly to pay higher costs in the acquisition of audit services.In addition,I find that audit fees will weaken the positive impact of earnings management on non-standard audit opinions.The conclusions will help to understand the auditor's reflection on the behavior of earnings management,and provide theoretical support and experience evidence for the design of the audit system and the healthy development of the capital market.