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

Abstract

This study aims to investigates in 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 client's industry) on the 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