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Does the Internal Audit Function Play a Role in Mitigating Earnings Management?
Hella Dellai
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DOI:10.17265/1548-6583/2024.01.003
Tunis El Manar University, Tunis, Tunisia
This paper aims to investigate the effect of the characteristics of the internal audit function (IAF) on earnings management (EM) for a sample of 27 Tunisian listed companies. The authors employed the Correlated Panels Corrected Standard Errors model to estimate the regression equation. The results showed that EM is negatively associated with internal audit effectiveness, frequency of audit committee meetings with Chief Audit Executives (CAEs), the partial outsourcing of internal audit, and the firm’s size. Moreover, the authors found a positive relationship between EM and the use of IAF as a training ground for management and the private sector. This study is important to academics, regulators, and policymakers in introducing new governance reforms to strengthen the IAF as an important internal governance mechanism to reduce earnings management practices in emerging countries. The results also provide useful information for investors to examine the effect of internal audit characteristics on earnings management.
earnings management, internal audit, emerging economies
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