Abstract:

In his article we investigate the association between the independence of external auditors and real earnings management. Auditor independence is measured by abnormal audit fees. Three types of real earnings management are considered in this study: abnormal operational cash flow, abnormal production and abnormal discretionary expenses. Results show that relationship between real earnings management and abnormal audit fees depend on the sign of the two measures. More specifically, his relation is significant only when abnormal audit fees are excessive and for downward earnings management.