Research On The Influence Of Auditor Industry Expertise On Earnings Management

In order to avoid loss and avoid tax,some listed companies choose earnings management to manipulate profits.Excessive earnings management is not only harmful to the long-term development of enterprises,but also may damage the rights and interests of stakeholders.The earnings management of listed companies is mainly carried out by two kinds of earnings manipulation methods:accrual earnings management and reality earnings management,which are different in manipulation methods,implementation cost,concealment degree and economic harm.As an external supervision means,audit can restrain the earnings management of listed companies to a certain extent,and the effective play of audit is not only related to the professional competence of auditors,but also depends on the auditor's neutral attitude,so that the audit procedure can play a practical role.Most of the existing researches think that the professional auditor is more competent and can restrain the excessive earnings manipulation.The importance of customers will affect audit independence.At present,there are few studies to analyze whether the professional auditors can effectively play a restraining role under the influence of customer importance.On the basis of previous research,this paper analyzes the relationship among auditor industry expertise,enterprise earnings management and customer importance by using insurance theory,reputation theory,rent-seeking theory and game theory.Taking 2014-2018 national A-share listed companies as a sample,this paper empirically tests the relationship between auditor industry expertise and corporate accrual and real earnings management.Further,according to the importance of the customer,the whole sample is divided into two sub samples:the important customer and the non important customer,to test how the importance of the customer will affect the relationship between them.The empirical results show that:(1)Auditors with industry expertise have a significant inhibitory effect on accrual earnings management and real earnings management.(2)Compared with the important customer group,in the non important customer group,the auditor industry expertise has a better effect on restraining the two earnings manipulation behaviors of listed companies.Itshows that important customers have a certain impact on the auditor's independence and reduce the audit quality.Therefore,this paper puts forward countermeasures and suggestions from the external government supervision organization and the accounting firm:First,support the development of professional expertise of accounting firms and respond to the call of the state to guide accounting firms to become bigger and stronger.Second,improve the government supervision mechanism,strengthen the supervision of CPA audit,improve the relevant punishment system,and improve the cost of breach of contract.Third,strengthen the construction of audit reputation mechanism.Compared with the economic benefits,when the firm pays more attention to audit reputation,it can make it maintain audit independence independently and ensure audit quality.The innovation of this paper is to redefine the customer importance and study the relationship between auditor industry expertise,enterprise accrual and real earnings management from the perspective of customer importance.