THE EFFECT OF AUDIT QUALITY AND FINANCIAL LEVERAGE ON AEM

Abstract

The current study aims to examine financial leverage and the role of audit quality in accrual-based earnings management in emerging firms. The case study involved firms that are traded on stock exchanges in Iraq and Oman. The systematic sampling technique involved a total of 31 samples from Iraq and 26 samples from Oman between the years 2009 and 2022. In evaluating this study’s hypotheses regarding its variables, a multivariate regression analysis technique that is based on a total sample for all collected variables is used. The empirical findings of this study indicate that financial leverage has a total non-significant impact on earnings management in emerging firms. Furthermore, this study has a total significant and negative impact on earnings management. The findings indicate that financial leverage has a total non-significant impact on earnings management. In relation to this finding, financial leverage is not directly related to earnings management in emerging firms. The finding has a total significant and negative impact on earnings management. In this context, financial leverage has a significant impact in restricting opportunities for financial misrepresentation in emerging firms. The study therefore makes a key addition to this topic in identifying some key factors. The study makes a key point that financial leverage is not directly related to earnings management in emerging firms. The finding has a total significant and negative impact on earnings management. The finding makes a key point that financial leverage has a significant impact in restricting opportunities for financial misrepresentation. The finding has a total total impact in improving financial transparency and reliability in emerging firms in Iraq and Oman. The finding has a total impact in offering key suggestions and guidance to auditors in restricting opportunities for financial misrepresentation in emerging firms.