The Impact of Audit Firm's Size and Rotation on Accounting and Real Earning Management Practices An Empirical Study on Egyptian Listed Companies

Document Type : Original Article

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Accounting Department Faculty of Commerce Alexandria University Alexandria Egypt

Abstract

The research aimed to study and test whether there was a Significant Variances between the companies in the level of earrings management (EM) practice, whether accounting (Em) or real (Em), depending variances of the level of External auditing quality Measures, where the researcher focused on both the audit firm's size, and the turnover of the auditor.
Based on a sample of companies listed on the Egyptian Stock Exchange over the period from 2013 in 2018, there is an empirical evidence about significant variances between the companies in level of accounting (Em) through accruals according to Auditor's size. The Miller ratio was used as an indicator of accounting (Em) for each individual company, while the total number of clients of each auditor was relied upon as a proxy of auditor's size.
However, the researcher did not find any significant variances between the companies in the level of real (Em) due to the auditor's size. On the other hand, there was no significant difference in the level of both accounting (Em) and real (Em), for companies that changed the external auditor between the previous period and subsequent period of the hiring a new auditor.

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