The Relationships Among Earnings Management, Independent Audit Opinion and Audit Firm Switch: A Research on Manufacturing Industry at Borsa İstanbul

In this paper, firstly the relationship between accruals/real transactions based earnings management and audit opinion is investigated. Secondly, the effect of prior modified audit opinion on audit firm switch is investigated. 1121 firm’year observations on Borsa Istanbul Manufacturing Industry are used. The results show that there is positive and significant relationship between the signed/absolute value of discretionary accruals and modified audit opinion. There is no relationship between the total amount of the abnormal production cost/abnormal operating expenses and modified audit opinion. A positive and significant relationship between prior modified auditor opinion and audit firm switch is determined. Audit rotation regulation has an effect on the audit firm switch in 2013 and companies change their audit firms.