851 2102

, , , ( , , , , ( , (54) (1002-6002) (citsigoL noissergeR) (SLO serauqS tsaeL yranidrO) (noissergeR ataD delooP), , , ,

.

: .

* - , .

** - , .

. * . **

- 159

*

Auditing Quality in Jordan and Its Impact on Earnings Management and Earnings Quality

AbstractThis study aims to investigate the existence of earnings management practices and earnings quality in the industrial public companies listed in Amman Stock Exchange (ASE), and tests the impact of auditing quality characteristics (the audit office size, the connection with other global offices, the client retention period, the auditing fees and the specialty in clients industry) on reducing earnings management practices, and enhancement earnings quality. Towards realizing the objectives of the study, the relationship was estimated and examined through the Logistic Regression (LR) test, and Ordinary Least Squares (OLS). Data of 45 companies of the industrial sector for the period 2001--2006 were arranged in a way that makes it possible to apply the (Pooled Data Regression). The most important conclusion of the study was that the industrial public companies listed in (ASE) have practiced earnings management each year in the study period, and the study cannot prove the earnings quality in the companies of the industrial sector. The study found no effect of the characteristics of the audit quality on reducing the earnings management, or enhancement the earnings quality. These results raise questions about the quality of auditing in Jordan, and the quality of financial statements disclosed by companies, and its usefulness in decision-making Keywords: Auditing Quality; the Accruals; Earnings Management;Earnings Quality; Industrial Jordanian companies.

*Assistant Professor - Ahlia University, Kingdom of Bahrain**Assistant Professor - University of Seventh of April , Libya

Dr. Allam Mohammed Mousa Hamdan*Dr. Imad Mohammed Abu Ijela**

061 2102

, , , (9991 ,kcolB). . , , , (5002 ,toiP), . , , , , . ( , ( ,

.

, , , .

(5002 ,.la te yravolleB) , ,

( , 9002).

161 -

, , , , , , slaurccA lamronbA : ;senoJ ;ylaeH yneewS ;knatS ;revaG ;naolS ;wohceD ;olegnAeD (, 0102(. , ,

:

-

-

- .

, (tnemeganaM sgninraE) , , , (ytilauQ sgninraE)

.

,

261 2102

, (8991 ,ttiveL), (3002 ,namneP) (4002 ,dnarhcS & wohceD) ( , 9002 7002 ,.la te naijremeD ;5002 ,.la te yravolleB), (redeorhcS 1002 ,.la te) , , , (sicnarF ;2002 ,vehciD &wohceD 6002 ,.la te snikneJ ;2002 ,.la te), (7002 ,letieT & aguhcaM) , (6002 ,yttaeB & orumatlA) , (4002 ,.la te nayrB), ( 0102) , (, 6002( , (,.la te loirO 3002). (dnalloH 3002 ,yasmaR &), (, 6002( , (5002 ,yrreT & gnaiQ) , , (,.la te nooY 6002) , (,.la te timuS 7002( . , , (8991 ,.la te leinnoC) , (1002 ,miharbE)

361 -

. (8991 ,.la te leinnoC( (5002 ,toiP) , , (1002 ,miharbE) , (,toiP 5002) , (6002 ,nnA & nevetS)

.

(,mehgenaC 4002) (1002 ,.la te llaB) , (,nahniX 5002) . , (,ooledneT 5002) , (021) (6) (, , , , , (, , , ( , 9002) , (, 9002) . ,

.

461 2102

, , (6002.la te nahC) (1( ,

.

(1):

(;2002 ,steeT ;2002 ,sicnarF ;5002,.la te yravolleB 4002 ,eeazeR & niaJ , 9002 , 6002) ,

=

=

561 -

, , , ( , 9002(

(7002 ,oL).

(7002) , , (54) : , ,

1002-6002.

, -

.

:

t,ieziS7 + t,iforp6 + t,iseeF5 + t,ipeeK4 + t,ilabolG3 +t,i5giB2 + 1=t,iME

)1(.............. t,i e + oitaRrruC01 + t,iIOR9 + t,iegareveL8 +

:

t,iME: : (1( (0( i t.

1: , .

01,..2: .

ME

661 2102

t,i5giB: , : (1) (0), i t.

t,ilabolG: , : (1) (0), i t.

t,ipeeK: , : (3) (1) (0), i t.

t,iseeF: , , i t.

t,iforP: , , (1) (0) i t.

t,ieziS: i t , ( (.

t,iegareveL: : / i t.

t,iIOR: : / i t.

t,ioitaRrruC: : / i t.

:

t,ieziS 7 + t,iforp 6 + t,iseeF 5 + t,ipeeK 4 + t,ilabolG3 +t,i5giB 2 + 1=t,iQE

(2)...........t,i e + oitaRrruC 01 + t,iIOR 9 + t,iegareveL 8 +

:

t,iQE: , i t.

761 -

:

:

, , .

.

:

, (1991 ,senoJ) (5991 ,.la te wohceD), (,.la te dradeB 4002) , (,maynamarbuS 6991) , .

(5991 ,senoJ) :

- (slaurccA latoT) , :

(3) ........................... t,iFCO - t,iIN = t,iCCAT

:

t,iCCAT: i, t. t,iIN: i, t.

t,iFCO : i, t.

861 2102

- (3,2,1( :

t,iCCAT: i, t.1-t,iA : i, 1-t.

t,iVER : i, t, 1-t.

t,iCER : i, t, 1-t.t,iEPP: i, t.

: .

- (slaurccA lamroN) (3,2,1( :

t,iCCAN: i, t. , lamronbA

slaurccA , :

=- CCANACCATCCAN ititit ,,,.................(6)

t,iCCANA: i, t.

t,ie

1-t,iA 1 = t,iCCAN1

)5( ................. ) t,iEPP( 3 + ) t,iCER - t,iVER) 2 +

CCAT1-t,iA

1 + =11-t,iA

2 + t,iCER - t,iVER

1-t,iA3 +

t,iEPP1-t,iA

t,i)4(........... t,ie +

961 -

:

10H: .

20H: .

30H: .

40H: .

, , .

sweiV-E , SSPS .

(1(

:

tseT noitubirtsiD lamroN (1( (areB-euqraJ) : , , , , , 50.0 , (goL larutaN.) , .

(selbairav ymmuD) .

071 2102

tseT ytiraenillocitluM

MLG ledoM raeniL lareneG (ycnednepednI), , ( , 3002) (scitsongaiD ytiraenilloC), (ecnareloT) , FIV rotcaF noitaflnI ecnairaV , (, 3002) (FIV) (5) . (1) (FIV)

(5) .

tseT noitalerrocotuA

. (WD nostaW nibruD) ( (, 3002( , (4) , (5.1 5.2), (1( W-D ( ( (704.2), ( ( (128.1)

.

171 -

(1)

selbairaVnoitalerrocotuA ytiraenillocitluM noitubirtsiD lamroN

-euqraJnostaW nibruD FIV ecnareloT eulav-P areB

-- 031.1 588.0 -- -- 5giB

-- 731.1 978.0 -- -- labolG

-- 494.1 966.0 -- -- peeK

-- 560.1 939.0 000.0 1201 seeF

-- 073.1 037.0 -- -- lanoisseforP

ynapmoC -- 921.1 688.0 000.0 8299 eziS

laicnaniF -- 724.1 107.0 000.0 44 egareveL

-- 030.1 179.0 000.0 03921 IOR

tnerruC -- 284.1 576.0 000.0 337 noitaR

sgninraE 704.2 -- -- -- -- tnemeganaM

lamronbA 128.1 -- -- 000.0 329774 slaurccA

( 1,2( 1,i ,2,i 12 , 22, , t,iQE ,t,iME ,1,i

2,i 12 , 22 :

) t,iseeF( e 5 + ) t,ipeeK( e 4 + ) t,ilabolG( e 3 + ) t,i5giB( e 2 + 1

) t,iIOR( e9 + ) t,iegareveL( e8 + ) t,ieziS( e7 + ) t,ilanoisseforp( e6 +

(7).......... 0 + )oitaRrruC( e01 +

1,i ,2,i n,,2,1 = i.

271 2102

(2) , , (1) , (0)

.

(2)

sraeYlamronbA

slaurccA

tnemeganaM sgninraE

latoT 0 1tnecreP .qerF tnecreP .qerF

54 %46 92 %63 61 0.213,045,1- 1002

54 %44 02 %65 52 0.931,915,2- 2002

54 %46 92 %63 61 0.779,200,2- 3002

54 %24 91 %85 62 7.623 4002

54 %89 44 %2 1 1.074,09 5002

54 %83 71 %26 82 0.912,566,3 6002

072 %95 851 %14 211 latoT

(2) , , , , (4002 ,eeazeR & niaJ ;0002 ,nyaH & yloviG)

.

, (2) , 6002, (82) %26, 5002, %2 5002 4002 , ,

371 -

, , , , , 5002 6002 ,

.

(3) : , ,

, , .

(3)

eziS ynapmoC *seeFgnitiduA sraeYlaicnaniF IOR egareveL

tnerruC noitaR

777.2 946.2 720.23 024,983,72 380,9 1002

553.3 707.3 875.13 958,880,92 763,9 2002

334.3 757.2 831.33 386,597,13 431,11 3002

781.3 914.3- 248.13 091,420,95 867,11 4002

216.3 297.5 192.82 276,773,07 419,11 5002

315.3 291.4 615.82 225,339,24 438,21 6002

* , $104.1 = DJ1

(3) 380,9 1002, 6002 438,21 . 1002 5002 %93 6002, , 3002 %82. 5002 4002 %4.3-, 1:2

5002 .

471 2102

(4) ( selbairav ymmuD 1,0( : , ,

, .

(4)

sraeY

labolG mrfi tidua fo eziS

labolgot dekniL-noN labolg ot dekniL 5giB-noN 5giB

tnecreP .qerF tnecreP .qerF tnecreP .qerF tnecreP .qerF

%46 92 %63 61 %72 21 %37 33 1002

%96 13 %13 41 %13 41 %96 13 2002

%76 03 %33 51 %42 11 %67 43 3002

%96 13 %13 41 %42 11 %67 43 4002

%17 23 %92 31 %33 51 %76 03 5002

%17 23 %92 31 %83 71 %26 82 6002

sraeY

lanoisseforP peeK

3 naht eroM sraey

3 naht sseL dezilaiceps-noN sezilaicepS sraey

tnecreP .qerF tnecreP .qerF tnecreP .qerF tnecreP .qerF

%72 21 %37 33 %31 6 %78 93 1002

%72 21 %37 33 %9 4 %19 14 2002

%72 21 %37 33 %2 1 %89 44 3002

%72 21 %37 33 %4 2 %69 34 4002

%72 21 %37 33 %4 2 %69 34 5002

%72 21 %37 33 %31 6 %78 93 6002

(4( , 6002, (, 5002 , 6002(. ,

571 -

. , 3002 , (4) 3002 6002,1002.

, .

, ,

.

1002-6002, ,

(tseT laimoniB), (5).

(5)

eulav-P tnecreP .qerF tnemeganaM sgninraE

%65 151 0 yrogetaC030.0

%44 911 1 yrogetaC

%001 072 latoT

(tseT laimoniB) (1,0) (5.0), :

5.0=)ME -noN(p =q dna ,5.0=)ME(P=P :oH)8(......... 5.0>)ME(P:1H

671 2102

(11)

(5) (151) (911) 1002-6002, (tseT laimoniB) %5, , : ;5002 ,yrreT & gnaiQ ;6002 ,.la te nooY ;7002 ,timmuS ;0102 ,nadmaH

3002 ,yasmaR & dnalloH ;3002 ,.la te eloirO .

( , 9002 te snikneJ 2002 ,vehciD & wohceD ;2002 ,.la te sicnarF ;6002 ,.la) , & reppihcS ;6002 ,yttaeB & orumatlA 3002 ,tnecniV) (6991 ,naolS) . (4002 ,.la te nosdrahciR)

:

1+t,iIOR : (i) (1+t).1: .

2: . t,iCCAT: (i) (t).

0 < (1-2) (1 < 2)

(9) :

(9) :

(11)

(9)........................ 1+t,iV + t,iCCAT 2 +(t,iCCAT -t,iIOR)1 +0 =1+t,iIOR

(01)........................ 1+t,i V +t,iCCAT 2p +t,iIOR1p +0p =1+t,iIOR

(11)........................ 1+t,iV + t,iCCAT (1 -2 (+(t,iIOR)1 +0 =1+t,iIOR

771 -

1 = 1 ( 1-2) = 2 (2-1( (9(, 0 < 2 . (noissergeR elpitluM) (tsaeL yranidrO

SLO serauqS) (01), (6).

(6)

sraeYtneicfifeoC tnatsnoC

eulav-P eulav-F2 1 0

250.0 571.3 100.0- 773.0 727.1 1002

000.0 441.35 000.0 487.0 365.1 2002

000.0 309.02 000.0 709.0 392.0- 3002

700.0 056.5 010.0- 244.0 838.2 4002000.0 586.9 210.0- 104.0 310.4 5002000.0 046.11 000.0 546.0 324.0 6002

* F %5 ( p p = 2(, ( 1- -n 24=1-2-54(

F 50.0 80.4 10.0 13.7

(6) 1002 0 < (1-2) = 2 , (1002) , , (2) (slaurccA lamronbA) , 61 1002. 2002 0 > 2 (2) 52 %65. 3002 (6) 0 > 2. 4002-5002 (2) (6) 0 < 2

1+t,i +t,iCCAT 2p +t,iIOR1p +0p =1+t,iIOR

871 2102

, 6002 (2( 82 %26 ,

(6) .

(5991 ,senoJ) (4002 ,.la te nosdrahciR) , , , , ,

.

, , (54 ( (ataD noitceS ssorC) (1002 6002) (ataD seireS emiT) (noissergeR ataD delooP), (elbairaV ymmuD) (noissergeR citsigoL). (7)

(1) . , (6002 ,.la te nehC ;8991 ,.la te einnoC) , , (7) . ,

971 -

. . (2991 ,xuoriG dna seiD) , . . (1002 ,inorteP & yelsaeB ;4991 ,.la te efeeK O)

.

.

, (2( (delooP noissergeR ataD) ( ( (SLO serauqS tsaeL yranidrO) (noissergeR elpitluM), (7). , , ( , 9002)

.

2012 180

)7(

Variables

Model 1 (N = 270) Model 2 (N = 270)

Expected sign

Coefficient ()

z-statistic

p-value

Coefficient (

)

t-statistic

p-value

Big5-

-0.047 -0.171 0.864 0.283 2.055 0.041*

Global - 0.202 0.692 0.489 -0.199 -1.215 0.225

Keep + -0.294 -0.667 0.505 -0.219 -1.193 0.234

Fees +/- 0.000 -0.176 0.860 0.112 0.596 0.551

Professional - 0.205 0.618 0.537 0.554 0.791 0.430

Size +/- 0.000 -0.262 0.793 -0.130 -1.385 0.167

FinancialLeverage +/- -0.005 -0.797 0.426 0.141 1.965 0.051

*

ROI +/- -0.001 -0.062 0.950 0.197 0.598 0.551

CurrentRation +/- 0.007 0.174 0.862 0.712 1.593 0.112

0.01 ** , 0.05 *

1.650 95% Z White Heteroskedasticity

1-9-270 p , n n p -1 ( 5% t 1.282 (260 =

EMi,t=1-0.047Big5i,t+0.202Globali,t - 0.294Keepi,t + 0.000Feesi,t + 0.205profi,t + 0.000Sizei,t- 0.005Leveragei,t - 0.001ROIi,t +0.007 CurrRatio + e i,tEQi,t=1-0.283Big5i,t- 0.199Globali,t - 0.219Keepi,t + 0.112Feesi,t + 0.554profi,t -0.130Sizei,t+ 0.141Leveragei,t - 0.197ROIi,t + 0.712 CurrRatio + e i,t

181 -

, . (1002-6002) , , , , , , . , , . , , ,

.

281 2102

, . 9002. : , : , , ,

.

, . 9002. , : :

, , .

, . 0102. , , , .

, . 6002. , , , , , .

, . 6002. , , , ,

.

, , . 0102. , , .

sgninraE evorpmI smrofeR lortnoC lanretnI oD .6002 .A yttaeB & ,.J orumatlAmoc.nrss//:ptth :NRSS ta elbaliavA ,repaP gnikroW ?ytilauQ

eTh .4002 .cicuL uaetruoC dna ,ihckarraM adnoS uoruothC ,naeJ dradeB ,tnemeganaM sgninraE evissergga no esitrepxe eettimmoC tiduA fo tceffe.53- 31 :(2) 32 ,yroeTh & ecitcarP fo lanruoJ A :gnitiduA

ot emiT stI :ytilauQ sgninraE .5002 .D leahciM & ,.E noD ,.J yravolleB.73 -23 pp ,rebmevoN ,lanruoJ APC eht ,tropeR dna erusaeM

laicnaniF ,yroeTh dna ecitcarP :stsylanA laicnaniF fo ydutS A .9991 .S ,kcolB. 59 -68 :(4) 55 ,lanruoJ stsylanA

evitceffE dna tnednepednI fo ecneuflnI eTh .4002 .S ,sariT & ,.C ,uiL ,.D ,nayrB.nrss//:ptth :NRSS ta elbaliavA ,ytilauQ sgninraE no seettimmoC tiduA280884=tcartsba/moc

pu-gnidnuoR sgninraE no ytilauQ tiduA fo tcapmI eTh .4002 .T ,mehgenaC 177 :(4) 31 ,weiveR gnitnuoccA naeporuE .ecnedivE KU emoS :roivaheB. 687-

- 183

Chan K., Chan L., Jegadeesh N., & Lakonishok J. 2006. Earnings Quality and

Stock Returns, Journal of Business, 79 )3(: 1041 -1082.Connie, L., Mark, L. & James, J. 1998. The Effect of Audit Quality on Earnings

Management, Contemporary Accounting Research, 15 )1(: 1 -24 .Dechow M., & Schrand M., 2004. Earnings Quality, the Research Foundation

of CFA Institute.Dechow P., Sloan R., & Sweeney A. 1995. Detecting Earnings Management,

The Accounting Review, 70 )2(: 193 -225.Dechow., & Dichev I. 2002. The Quality of Accruals and Earnings: The Role of

Accrual Estimation Errors, the Accounting review, 77 )1(: 35 -59.Demerjian P., Lev B., & Sarah M. 2007. Managerial Ability and Earnings

Quality, Working Paper University of Michigan.Ebrahim, A. 2001. Auditing Quality, Auditor Tenure, Client Importance, and

Earnings Management: Additional Evidence. Rutgers University. Available at: www.aaahq.org/audit/midyear.

Francis J., LaFond R., Olsson P., & Schipper K. 2002. The Market Pricing of Earnings Quality, Available at SSRN: http://ssrn.com/abstract=414140 or doi:10.2139/ssrn.414140

Givoly, D. and C. Hayn. 2000. The Changing Time-Series Properties of Earnings, Cash Flows and Accruals: Has Financial Reporting Become More Conservative? Journal of Accounting and Economics 29 )1(: 287- 320.

Hamdan A. 2010. The Creative Accounting and Dividend Payments: Additional Evidence from United Arab Emirates, Accounting Forum, Acceptable.

Holland D., & Ramsay A. 2003. Do Australian companies manage earnings to meet simple earnings benchmarks? Journal of Accounting and Finance, 43 )1(: 41 -62.

Jain P., & Rezaee Z. 2004. The Sarbanes-Oxley Act of 2002 and Accounting Conservatism, Available at SSRN: http://ssrn.com/abstract=55 4643

Jenkins D., Kane G., & Velury U. 2006. Earnings Quality Decline and the Effect of Industry Specialist Auditors: An Analysis of the Late 1990, Journal of Accounting and Public Policy, 25 )1(: 71 -90.

Jones J. 1991. Earnings Management during Import Relief Investigations, Journal of Accounting Research, 29 )2(:193 -225.

Levitt, A. 1998. The numbers game. speech delivered at the NYU Center for Law and Business, New York, NY, 28 September, available at: www.sec.gov

Lo, K. 2008. Earnings Management and Earnings Quality, Sauder School of Business, Journal of Accounting and Economics, 45 )1(: 350- 357.

Machuga S., & Teitel K. 2007. The effects of the Mexican Corporate Governance Code on Quality of Earnings and its Components, Journal of international Accounting Research, 6 )1(: 37- 55.

2012 184

Oriol, A., Jordi, P., & Ester, O. 2003. Earnings Management in Spain. Some Evidence from Companies Quoted in the Spanish Stock Exchange. UPF Economics and Business, Working Paper No. 677: Available at SSRN: http://ssrn.com/abstract=428262 or doi:10.2139/ssrn.428262

Penman, Stephen H., 2003. The Quality of Financial Statements: Perspectives from the Recent Stock Market Bubble, Accounting Horizons, Supplement, pp 77- 96.

Piot C. 2005. Audit Quality and Earnings Management in France, Social Sciences and Humanities Research Council of Canada.

Qiang C., & Terry W. 2005. Equity Incentives and Earnings Management, the Accounting Review, 80 )2(: 441- 480 .

Richardson, S., Sloan, R., Soliman, M., & Tuna, I. 2005. Accrual Reliability, Earnings Persistence and Stock Prices, Journal of Accounting and Economics, 39 )3(: 473- 485.

Schipper K., & Vincent L. 2003. Earnings Quality, Accounting Horizons, Supplement, pp 97 -110.

Schroeder, R., Clark, M. 2001. Accounting Theory and Analysis, John Wiley & Sons, Inc.

Sloan, R. 1996. Do stock prices fully reflect information in accruals and cash flows about future earnings?, Accounting Review, 71 )1(: 289315.

Steven, J., & Ann V. 2006. Earnings Management Within Europe: The Effects of Member State Audit Environment, Audit Firm Quality and International Capital Markets, Accounting and Business Research, 36 )1(: 33 -52.

Subramanyam, K. 1996. The Pricing of Discretionary Accruals, Journal of Accounting and Economics, 22 )1(: 249- 284.

Sumit, A., Souphala, C., Chunlin, and L. Rhee. 2007. Earnings Management behaviors under different economic environment: Evidence from Japanese banks. Journal of International Review of Economic & Finance, 16, )3(: 429- 443.

Teets W. 2002. Quality of Earnings: An Introduction to The Issues in Accounting Education Special Issue, Issues in Accounting Education, 17 )4(: 1 -32.

Tendeloo. B., & Vanstraelen A. 2008. Earnings Management and Audit Quality in Europe: Evidence from the Private Client Segment Market, European Accounting Review, 17 )3(: 447 -469.

Xinhan, W. 2005. Earnings Management, audit opinion and auditor location. City University of Hong Kong. Working Paper, Available at: SSRN: http://ssrn.com

Yoon S., Miller G., Jiraporn P. 2006. Earnings Management Vehicles for Korean Firms. Journal of International Financial Management and Accounting, 17 )2(: 85- 109.