Title: Auditor independence, auditor specialisation and earnings management: further evidence from Singapore

Authors: Rusmin, J-L.W. Mitchell Van Der Zahn, Greg Tower, Alistair M. Brown

Addresses: School of Accounting, Curtin University of Technology, G.P.O. Box U1987, Perth, Western Australia 6845, Australia. ' Curtin University of Technology, G.P.O. Box U1987, Perth, Western Australia 6845, Australia. ' Curtin University of Technology, G.P.O. Box U1987, Perth, Western Australia 6845, Australia. ' Curtin University of Technology, G.P.O. Box U1987, Perth, Western Australia 6845, Australia

Abstract: This study uses data from 298 Singapore publicly listed firms to examine the association between earnings management and two audit value attributes: auditor independence and auditor specialisation. We find firms engaging a specialist auditor had significantly lower levels of abnormal accruals than those using non-specialists. This supports the view industry specialisation better enables an auditor to constrain a client|s earnings management. Our findings indicate the lack of a universal association between audit value attributes and earnings management. Results imply recent action of Singapore policymakers to strengthen rules governing audit independence as related to non-audit services may have been premature.

Keywords: abnormal accruals; auditor independence; auditor specialisation; Singapore; earnings management; audit value attributes; auditing.

DOI: 10.1504/IJAAPE.2006.010300

International Journal of Accounting, Auditing and Performance Evaluation, 2006 Vol.3 No.2, pp.166 - 193

Published online: 13 Jul 2006 *

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