Earnings behavior in bankrupt firms: the role of auditor

The purpose of this research is to examine the earnings behavior in bankrupt firms while focusing on the role of the auditor. Therefore، the present paper studies the earnings management in bankrupt firms and the impact of auditor change and size on earnings management. Using a sample of 41 bankrupt firms and 41 non-bankrupt firms over the period of 1380 to 1389، we find that failed firms manage earnings in the prior year to failure through accounting (accruals) manipulation and real operating actions. Moreover، we show that although auditor change leads to a decrease in earnings management but auditor size does not affect earnings management.