Audit Market Concentration and Earnings Quality: Evidence from Governmental Concentration and Private Concentration

The purpose of this study was to investigate the relationship between audit market concentration and earnings quality. Because of the effects of positive and negative audit market concentration on earnings quality, this research studies the impact of audit market concentration on three criteria quality of earnings including: discretionary accruals, accruals quality and conservatism. This study examines the role of governmental concentration and private concentration on the present relationship. Using multiple linear regression analysis and using a sample of 90 firms for a period of 2011 to 2016, the results show that as concentration increases, the amount of discretionary accruals reduces, consequently earnings management reduces. Moreover, as concentration, accruals quality increases. Of course, there is not a significant relationship between concentration and conservatism. In addition, evidence suggests that type of concentration (governmental concentration or private concentration) has not a significant impact on the relationship between the audit market concentration and discretionary accruals as well as the relationship between audit market concentration and accrual quality. While the state concentration occurs significantly, reduce conservatism.