Research On The Impact Of Aggressive Real Earnings Management On Audit Fees

As the managers of enterprises gradually realize that earnings management can bring many advantages to enterprises,this kind of earnings management behavior is becoming more and more popular in enterprises.However,there are two sides to any behavior.In recent years,some scholars have found that the earnings management has brought adverse effects on the enterprise itself and external users of relevant information,and this negative impact has spread to the entire capital market.Although external regulators have formulated relevant laws and regulations to regulate and restrict this behavior to a certain extent,in order to avoid harming the healthy operation of the securities market,and also achieved obvious results,the earnings quality of Chinese enterprises is still not optimistic.Therefore,some scholars study the impact of earnings management on audit fees from the perspective of auditors,but the existing research focuses on the perspective of accrued earnings management.However,after the enactment of the Sarbanes Act(SOX)in the United States,business operators are facing more stringent regulatory situation,so they prefer real earnings management which is less easily recognized or perceived by information users.Because of the difference between the two ways of earnings manipulation,the performance of the company and the contracting risk of CPAs are different.Therefore,it is of theoretical and practical significance to change the focus from accrued earnings management to real earnings management,and to explore whether auditors consider it as a factor affecting audit fees when they perceive the real earnings management of enterprises.Based on the data of A-share listed companies in China from 2008 to 2017,this paper empirically explores the impact of rad aggressive real earnings management on current and future audit costs.The aggressive real earnings management implemented by the managers of enterprises has an impact on the normal business activities of enterprises,so it will damage the current and future economic benefits of enterprises.This paper assumes that CPAs will take into account the aggressive real earnings management behavior of enterprises when predicting audit risk,which is reflected in audit pricing.The research shows that there is a significant positive correlation between aggressive real earnings management and current and future audit costs.In addition,the increase of audit fees in this period is partly due to the auditor's more audit work.The increase of audit fees in the future is due to the increase of operating risks.And because the managers of enterprises with pledge of controlling shareholders' equity have stronger motivation to manage real earnings in order to maintain the stability of the company's stock price.Therefore,further exploration found that the controlling shareholder equity pledge has a positive regulatory effect on the above-mentioned correlation.