Discretionary-Accruals Models and Audit Qualifications

Posted: 14 Mar 2001

See all articles by Eli Bartov

Eli Bartov

NYU Stern School of Business

Ferdinand A. Gul

Monash University Sunway Campus

Judy S.L. Tsui

Hong Kong Polytechnic University - School of Accounting and Finance

Multiple version iconThere are 2 versions of this paper

Abstract

The primary goal of this study is to evaluate the ability of the Cross-Sectional Jones Model and the Cross-Sectional Modified Jones Model to detect earnings management vis-a-vis their time-series counterparts by examining the association between discretionary accruals and audit qualifications. These two cross-sectional models have not been formally evaluated by prior research, and their use may offer certain advantages to investors and researchers over their time-series counterparts. A sample of 173 distinct firms with qualified audit reports and a matched-pair control sample with clean audit reports are used. Only the two cross-sectional models are consistently able to detect earnings management. One limitation of this study is that its findings merely indicate the superiority of the cross-sectional models vis-a-vis their time-series counterparts in an audit qualification setting, not validate either the former or the latter.

Keywords: Discretionary-accruals models; Earnings management; Audit qualification; Big Six auditors

JEL Classification: M41, M43, M49, D21, C21, C22

Suggested Citation

Bartov, Eli and Gul, Ferdinand A. and Tsui, Judy S.L., Discretionary-Accruals Models and Audit Qualifications. Journal of Accounting and Economics, Vol 30, No 3, December 2000, Available at SSRN: https://ssrn.com/abstract=261428

Eli Bartov

NYU Stern School of Business ( email )

44 W. 4th Street, Suite 10-96
New York, NY 10012
United States
212.998.0016 (Phone)

Ferdinand A. Gul

Monash University Sunway Campus ( email )

Jalan Lagoon Selatan
Selangor Darul Ehsan
Bandar Sunway, 46150
Malaysia

Judy S.L. Tsui (Contact Author)

Hong Kong Polytechnic University - School of Accounting and Finance ( email )

M715, Li Ka Shing Tower
Hung Hom, Kowloon, Kowloon
Hong Kong
852 2766 7828 (Phone)
852 2334 7830 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
3,117
PlumX Metrics