Abstract:
This study attempts to investigate the association between earning management and debt financing with the moderating role of audit quality evidence from Pakistan. It empirically examines the relationship understudy in one of the emerging economies of South Asia i.e., Pakistan, for the period from 2009 to 2018. This association between debt financing and earnings management can be explained with the support of trade-off theory, pecking order theory, and agency cost theory. For analysis, the data from 100 non-financial representative listed firms from each market is used. Panel regression is employed as the estimation procedure. This study demonstrates that the audit quality has a moderating effect on the relationship between debt financing and earnings management. However, the role of audit quality has a vital role in earnings management. While this analysis is constrained by results, it guides key users of the financial statements. This thesis calls upon researchers to investigate and evaluate the financial sector of Pakistan.
