Proceedings of the 7th International Conference on Accounting, Management and Economics (ICAME-7 2022)

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The Effect of Financial Distress and Free Cash Flow on Earnings Management with Quality of Audit as a Moderator

Authors
Andi Wawo1, *, Mediaty1, Abdul Hamid Habbe1, Syamsuddin1
1Hasanuddin University, Makassar, Indonesia
*Corresponding author. Email: andiwawo@gmail.com
Corresponding Author
Andi Wawo
Available Online 29 May 2023.
DOI
10.2991/978-94-6463-146-3_15How to use a DOI?
Keywords
Financial Distress; Free Cash Flow; Audit Quality and Earnings Management
Abstract

This study aims to provide empirical evidence of the relationship between financial distress with modified Altman z-score model and free cash flow on earnings management with audit quality as moderating. This study uses a sample of manufacturing companies listed on the Indonesia Stock Exchange in 2016–2020. The results showed that financial distress with the modified Altman z-score model had a negative effect on accrual earnings management. This implies that companies experiencing financial distress will perform accrual earnings management. The hypothesis that free cash flow has a negative effect on earnings management is supported which provides evidence that large free cash flows will tend to reduce accrual earnings management in fulfilling contractual commitments with company owners. Meanwhile, the hypothesis of audit quality moderating the relationship between financial distress and free cash flow on earnings management is supported. This shows that a quality audit will be able to reduce accrual earnings management in the company.

Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 7th International Conference on Accounting, Management and Economics (ICAME-7 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
29 May 2023
ISBN
978-94-6463-146-3
ISSN
2352-5428
DOI
10.2991/978-94-6463-146-3_15How to use a DOI?
Copyright
© 2023 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Andi Wawo
AU  - Mediaty
AU  - Abdul Hamid Habbe
AU  - Syamsuddin
PY  - 2023
DA  - 2023/05/29
TI  - The Effect of Financial Distress and Free Cash Flow on Earnings Management with Quality of Audit as a Moderator
BT  - Proceedings of the 7th International Conference on Accounting, Management and Economics (ICAME-7 2022)
PB  - Atlantis Press
SP  - 144
EP  - 159
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-146-3_15
DO  - 10.2991/978-94-6463-146-3_15
ID  - Wawo2023
ER  -