Auditor Industry Specialization,R&D Capitalization And Earnings Management

Under the increasing situation of R&D investment,accounting treatments such as confirmation,measurement and disclosure of R&D investment by enterprises have an important impact on the financial report of enterprises.In 2007,the accounting standards of China began to implement adjusted the R&D expenditure from �full expense� to �conditional capitalization�,which made enterprises have more choices.As the provisions of China's accounting standards on capitalization conditions are not specific and cannot be quantified,the professionalism of R&D investment itself increases the information asymmetry,and also creates conditions for the capitalization of R&D expenditures to become a means of earnings management.For external information users,it is difficult to judge the authenticity of the capitalization of R&D expenditures of enterprises,and auditors can obtain more internal information in annual audits or special audits,and firms with industry expertise can be more capable.Professional investment in training and technology to improve audit quality.Therefore,will the company manage its earnings through R&D expenditure capitalization? Does the audit industry expertise identify and monitor the company's conduct of earnings management based on this? Will this kind of supervision function better in high-tech enterprises? Do the "product type" and "low cost" industry expertise have different effects? These are topics that deserve further study.This paper takes the 2010-2017 CSI A-share listed company as a sample to empirically test the relationship between R&D expenditure capitalization and earnings management,and whether the firm's industry expertise can inhibit the company's earnings management through R&D capitalization.It is further explored whether the different categories of industry expertise have different effects on the phenomenon of earnings management through R&D expenditure capitalization.The research results show that:(1)enterprises will realize earnings management through capitalization of R&D expenditure.(2)The audit industry expertise has a restraining effect on the company's earnings management through R&D expenditure capitalization.(3)In hightech enterprises,the audit industry expertise is more effective in suppressing earnings management through R&D expenditure capitalization.(4)For the �product type� and �low cost� industry expertise,the �product type� industry expertise is more effective in suppressing earnings management through R&D expenditure capitalization.After the robustness test,the results are still significant.Finally,based on the conclusions obtained,this paper proposes relevant recommendations.