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Audit partner tenure and earnings management: evidence from Vietnam

Tan Thi Giang Tran (School of Business, University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam)
Tri Tri Nguyen (Faculty of Business and Law, University of Roehampton, London, UK and School of Business, University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam)
Bich Thi Ngoc Pham (School of Business, University of Economics Ho Chi Minh City, Ho Chi Minh City, Vietnam)
Phuong Thi Thu Tran (Faculty of Accounting and Auditing, University of Finance and Accountancy, Quang Ngai, Vietnam)

Journal of Financial Reporting and Accounting

ISSN: 1985-2517

Article publication date: 7 March 2023

250

Abstract

Purpose

This study aims to examine the relationship between audit partner tenure and earnings management of companies listed on Vietnamese stock exchanges.

Design/methodology/approach

This study uses a sample of 1,363 observations from 2016 to 2019. This study manually collects data on audit partner tenure. Using Datastream financial data, this study calculates abnormal accruals using the modified-Jones models (Jones, 1991; Dechow et al., 1995; Kothari et al., 2005), which are used as the proxy for earnings management. This study runs Ordinary Least Squares regressions to test this study’s hypothesis.

Findings

The results show that audit partner tenure is positively related to abnormal accruals. Cross-sectional analyses indicate that the relationship between audit partner tenure and abnormal accruals is more pronounced for firms that are audited by non-Big Four auditors and for firms that have chief executive officer-chairperson duality, suggesting that weak corporate governance is a channel for the established relationship. The evidence also shows that audit partner tenure is negatively associated with the magnitude of income-decreasing accruals but has no relationship with income-increasing accruals. This study’s findings are robust for several tests, including using the propensity score matching approach.

Originality/value

To the best of the authors’ knowledge, this study is the first to provide evidence of the relationship between audit partner tenure and earnings management in Vietnam.

Keywords

Acknowledgements

The authors thank the School of Business, University of Economics Ho Chi Minh City for their funding for the research. They are thankful to the Editors and anonymous reviewers for their constructive comments and suggestions that have greatly improved their paper. All remaining errors are their own.

Citation

Tran, T.T.G., Nguyen, T.T., Pham, B.T.N. and Tran, P.T.T. (2023), "Audit partner tenure and earnings management: evidence from Vietnam", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-07-2022-0258

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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