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IJSTR >> Volume 8 - Issue 10, October 2019 Edition

International Journal of Scientific & Technology Research  
International Journal of Scientific & Technology Research

Website: http://www.ijstr.org

ISSN 2277-8616

Contagion Effect Of Decrease In Auditor Quality And Earnings Management

[Full Text]



Nanda Fito Mela





This research aimed at examining the contagion effect of a decrease in auditor quality on the earnings management practices. The number of research samples was 79 companies within 2012-2015. The earnings management was measured using Jones Modified Model. The decrease in auditor quality is measured by the misstatement of financial statements. Based on the results of the regression analysis, the contagion effect of a decrease in auditor's quality in the previous period and the current period, increasing the practice of earnings management. These results indicate that the contagion effect of a decrease in auditor quality indicates misstatement that provides a gap for companies to practice earnings management. The misstatement was carried over to the following financial reporting period, there by improving earnings management practices in the following period. The misstatement was carried over to the financial statement of other companies with the same auditor. Accordingly, it increases the earnings management Index Terms—Contagion Effect; Auditor Quality, Earnings Management, Misstatement



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