Section 340f of the German Commercial Code allows banks to provision against the special risks inherent to the banking business by building hidden reserves. Beyond risk provisioning, these reserves are implicitly accepted as an earnings management device. By analyzing financial statements of...

We use Benford's Law to provide evidence that German firms round up both their net income and earnings per share. We use the introduction of the euro to show that round earnings numbers are likely the result of earnings management. The incentive to round up comes from stakeholders’ left-digit...

Evidence about the relation between earnings management and voluntary audits is scarce, and there is no research about the effectiveness of mandatory audits to improve earnings quality. Using a sample of Spanish SMEs, where some companies are mandatorily audited and some are exempt from audit,...

In the model there are two types of financial auditors with identical technology, one of which is endowed with a prior reputation for honesty. We characterize conditions under which there exists a 'two-tier equilibrium' in which 'reputable' auditors refuse bribes offered by clients for fear of...

This research work is aimed at determining the effectiveness of the Audit Committee (AC), analyzing its impact on the reliability of accounting information issued by spanish listed companies. With this aim, we study whether certain features such as its voluntary or otherwise compulsory...

Most of the bankruptcy prediction models developed so far have in common that they are based on quantitative data or more precisely financial ratios. However, useful information can be lost when disregarding soft information. In this work, we develop an automated content analysis technique to...