THE INFLUENCE OF AUDITOR REPUTATION, AUDIT FIRM INDUSTRY SPECIALIZATION, AND AUDIT FIRM TENURE ON REAL EARNINGS MANAGEMENT WITH BOOK-TAX DIFFERENCES AS A MEDIATOR

Fandy Arman Nulhakim; Syahril Djaddang; Darmansyah Darmansyah; Harnovinsah Harnovinsah

doi:10.23960/jak.v31i1.4569

Fandy Arman Nulhakim Universitas Pancasila
Syahril Djaddang Universitas Pancasila
Darmansyah Darmansyah Universitas Pancasila
Harnovinsah Harnovinsah Universitas Pancasila

DOI: https://doi.org/10.23960/jak.v31i1.4569

Keywords: Audit Firm Industry Specialization (AFIS), Auditor Reputation, Book-Tax Differences, PAF Tenure, Real Earnings Management (REM)

Abstract

This study examines the influence of auditor reputation, industry specialization of Public Accounting Firms (PAFs), and PAF tenure on real earnings management (REM), with book-tax differences (BTD) acting as a mediating factor. Drawing on agency, signaling, stewardship, and institutional theories, the research explores how these audit attributes interact with information asymmetry to affect corporate reporting practices. A quantitative design was employed, focusing on 72 consumer goods companies listed on the Indonesia Stock Exchange between 2021 and 2023, using purposive sampling to select 35 firms, yielding 105 firm-year observations. Data was gathered from financial statements and annual reports and analyzed through Structural Equation Modeling–Partial Least Squares (SEM-PLS) with SmartPLS 4. The findings reveal that auditor reputation and industry specialization significantly impact REM, while PAF tenure and BTD do not show direct effects. However, BTD serves as a partial mediator, linking auditor characteristics to REM, illustrating an indirect influence of audit quality on reporting practices. The model reports R² values of 3.0% for BTD and 55% for REM, suggesting a moderate predictive ability. The study emphasizes the importance of audit quality in shaping reporting outcomes in emerging markets. Limitations include a short observation period and reliance on a single measure for several variables, suggesting areas for future research.

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