The Effect of Audit Firm Size on Earnings Management: Using the CEO Compensation as Moderator

Abstract

This study investigates the impact of the audit firm size on earnings management by using the CEO compensation as a moderating variable. This study was conducted in service and industrial firms listed on the Amman Stock Exchange from 2015 to 2019. The results of this research were examined using a fixed-effect model, and many robustness tests were used to show that the conclusions are reliable when using different measures. The size of the audit company and the management of earnings were shown to be significantly correlated in the research. However, show how the combined effects of CEO remuneration and audit firm size have a considerably detrimental impact on the management of profitability. When making decisions on external audits and earnings management, the government, investors, and shareholders would benefit from this study. It highlights several strengths and flaws in the audit firm size and CEO compensation that aid in restricting earnings management.