Research On The Relationship Between Internal Control,Auditor's Reputation And Earnings Management Of Listed Company

Earnings quality of listed companies is an important factor to measure the value of enterprises.It is also an important indicator for the stakeholders to measure the risk of investment.Earnings management includes accrual earnings management and real earnings management.Past studies have shown that these two patterns are both common in China's listed companies.Earnings management could mislead the judgment and decision of investors,damage the effective allocation of market resources and produce negative influence for the operation of listed companies.So it has always been a hot topic of discussion in the theory circle and practice circle.Internal control is a series of control activities such as self-adjustment,constraint,and planning adopted by the company,and it has a significant impact on the company's operations.It is of great significance to clarify the correlation between internal control and earnings management in order to improve the internal governance of listed companies and protect the rights of stakeholders.Auditor's reputation is an indirect sign for its audit quality.It is generally believed that accounting firm with high reputation could provide more credible financial information,thus it could effectively reduce the information asymmetry and investors' investment risk.Does auditor's reputation could effectively restrain earnings management behavior of listed company,which is a very important question to protect the rights of investors and to promote the normative development of the audit market and the capital market in China.This paper take 2012-2015 Shanghai and Shenzhen listed companies of manufacturing industry as the research object,based on double perspective of accrual earnings management and real earnings management,make an empirical research for the correlation and interaction between internal control,auditor's reputation and earnings management of listed company.Studies have shown that internal control and auditor's reputation could significantly inhibit accrual and real earnings management behavior of listed company.The inhibition of real earnings management is mainly realized by constraints on production manipulation and expenses manipulation,and it has no significant relationship with sales manipulation of listed companies.Finally,we put forward some suggestions for accounting firms,stakeholders and government regulators.We hope to promote the normative development of the audit market and the capital market in China.We also hope that this article is only the beginning of what you can do with our results.