The Effect of Managerial Entrenchment and Internal Control Weaknesses on Cosmetic Earning Management

Articles in Press

Document Type : Research Paper

Authors

1 : Masters of Accounting, Department of Accounting and financial management, Faculty of Economics and Management, Urmia University, Urmia, Iran.

2 Assistant professor, Department of Accounting and financial management, Faculty of Economics and Management, Urmia University, Urmia, Iran.

3 Associate Professor, Department of Accounting and financial management, Faculty of Economics and Management, Urmia University, Urmia, Iran

10.22051/jaasci.2024.45777.1815

Abstract

Purpose: Considering the importance of the position of management in the preparation of financial statements, the purpose of this research is to investigate the effect of managerial entrenchment and internal control weakness on cosmetic earnings (losses) management

Method: In this research, the information related to 103 companies admitted to the Tehran Stock Exchange during the period of 2015 to 2022 was examined. In order to measure the neatness, a method called Benford's rule was used. Chi-square test was used to test the hypotheses.

Results: The research results showed that in companies with high managerial entrenchment, the actual frequencies of profit and loss figures follow Benford's law, and in companies with low managerial entrenchment, the actual frequencies of profit and loss figures do not follow Benford's law.

Conclusion: The general results of the research showed that managerial entrenchment has a significant effect on cosmetic earnings (losses) management. In addition, the results indicate that the internal control weakness has no effect on the relationship between managerial entrenchment and cosmetic earnings (Losses) management.

Contribution: The findings of this research can lead to reducing agency problems and improving company reporting by emphasizing managerial entrenchment.

Keywords

Main Subjects

Journal of Accounting and Social Interests

Articles in Press, Accepted Manuscript
Available Online from 23 April 2025

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History

  • Receive Date: 09 December 2023
  • Revise Date: 19 January 2024
  • Accept Date: 23 January 2024

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