Research On The Relationship Between Executive Audit Background And Real Earnings Management Based On Role Perspective

With the gradual expansion of the total asset size of China's capital market,more and more enterprises are hiring executives who have experience in accounting firms.Under the system of "two rights"(ownership and management rights)in contemporary enterprises,the management has the motivation to use the internal information advantage to carry out earnings manipulation and the space to enhance the value of personal benefit.Manipulating surpluses based on real activities can mislead financial reporting information,thereby misleading stakeholder investment decisions,resulting in reduced effectiveness of resource allocation and hindered healthy development of capital markets.By examining the relationship between executive audit background and real earnings management,this paper examines whether the executive background of accounting firms will improve the real earnings management of the firm,and whether the audit background of executives in different roles will affect real earnings management heterogeneously.Using the data of the A-share listed companies published by China's Shanghai and Shenzhen stock markets in 2007-2017 and the executive resume data published by CSMAR governance structure database.Based on the least square linear regression model,I examine the influence of executive audit background on the real earnings management level of enterprises.The empirical analysis shows that if the members of the management team have an audit background,the real earnings management level of the enterprise will be significantly higher than that of enterprises without such executives.This shows that audit background executives may have a unique anti-audit capability,which was learned from the accounting firms,deliberately planning real projects to manage the.earnings and are not perceived by the CPA.Further empirical evidence suggests that supervisory executives with audit background are more inclined to implement real earnings management than decision-making executives.Supervisory executives remain independent within the management and supervise executive directors' decisions.However,because their selection is subject to shareholders' meetings,they usually have the motivation to meet the requirements of shareholders who holds a large position in board and"guide" the company to carry out earnings manipulation.In addition,the endogenous test proves that there is no strong "selection effect" between the executive audit background and the enterprises with higher real earnings management level.The conclusions of this paper help to deepen the understanding of the economic consequences of the auditing background characteristics of executive,and provide empirical evidence on the heterogeneity of the audit background's impact on real earnings management under different roles of executive,and provide further support for relevant government departments to regulate the disclosure of accounting information,thus guarantee the healthy development of capital market.