Non-standard audit opinions and earnings management of listed companies——Evidence from China

Abstract

Numerous academics domestically and internationally have focused on the relationship between earnings management and audit views; nevertheless, much of the literature now in circulation focuses on the effect of earnings management on audit opinions, with little or no emphasis paid to the opposite relationship. Using the enterprise's non-standard audit views from the prior period as a basis, this article explores the influence on the current period's earnings management. Based on data from a sample of all A-share listed companies in China from 2010 to 2021, it has been discovered that non-standard audit opinions will hinder enterprise earnings management. This effect is more pronounced in state-owned businesses and businesses audited by the Big Four accounting firms. Furthermore, this article discovers that audit fees are an important tool for firms to get non-standard audit opinions, which are then employed as intermediary factors to influence corporate earnings management. This paper's research framework organically integrates audit opinions, earnings management, and audit fees, expanding and deepening theoretical research on earnings management and audit opinions.