Earnings Cosmetics and Auditor Gender: Evidence from Finnish Private Firms

Abstract

This paper investigates whether there are differences in cosmetic earnings management between firms audited by male vs. female auditors. A number of previous studies have documented that listed firms around the world engage in cosmetic earnings management. This paper is the first one to document such behavior in private SMEs. Our results indicate that auditor gender makes a difference in earnings cosmetics. We find that earnings cosmetics is more likely to appear in firms audited by male auditors, suggesting that gender diversity in auditing may help increase audit quality.