• Is there a trade-off between accrual-based and real earnings management activities in the presence of (fe) male auditors?

      Owusu, Andrews; Mansour Zalata, Alaa; Omoteso, Kamil; Elamer, Ahmed A; University of Coventry; University of Southampton; University of Derby; Brunel University London (Springer, 2020-11-13)
      Prior research suggests that the presence of high quality auditors (i.e. proxied by audit firm characteristics) constrains accrual-based earnings management, but it inadvertently leads to higher real activities manipulation. We investigate whether such trade-off exists between accrual-based and real earnings management activities in the presence of female or male auditors. We use a sample of UK firms for the period 2009 to 2016 and find that firms audited by female auditors do not resort to a higher level real activities manipulation when their ability to engage in accruals management is constrained. Overall, our results suggest that the benefits of hiring female auditors (i.e. less accrual-based earnings management) are overwhelmingly higher than the costs they might bring to the client firms (i.e. higher real activities manipulation).