The Impact of Financial Structure on the Relationship Between Audit Fees and Earnings Management Practices - An Empirical Study on A Sample of Companies Listed on the Iraq Stock Exchange | Tikrit Journal of Administrative and Economic Sciences

This study seeks to analyze and examine the impact of the financing structure on the relationship between audit fees and earnings management practices among firms listed on the Iraq Stock Exchange. To achieve the research objectives, an applied methodology was employed, grounded in quantitative mathematical analysis and evaluation. Data were collected from the annual financial statements of companies listed on the Iraq Stock Exchange, along with the official market bulletins, covering the period from 2010 to 2023. The study sample comprised 13 joint-stock companies, selected based on specific eligibility criteria and their compliance with the study’s requirements.

The findings revealed a significant influence of the financing structure on the relationship between audit fees and earnings management. Specifically, the financing structure—represented by financial leverage—was found to moderate this relationship, such that the negative effect of audit fees on earnings management was more pronounced in firms with high financial leverage. This suggests that companies with greater reliance on debt financing face heightened litigation risk, prompting auditors to undertake more extensive audit procedures to mitigate such risks, which in turn leads to increased audit fees.

Based on these findings, the study proposes several recommendations. Chief among them is the need for corporate boards of directors to strengthen governance mechanisms—particularly by enhancing the independence of audit committees. This is essential to ensure that decisions related to audit fee determination are subject to rigorous oversight, with careful consideration of the role played by the financing structure. Such measures are expected to promote transparency and fairness in fee determination and to reduce the potential for earnings management practices driven by financial pressure.

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Hozheen Abdulazeez Hassan, & Nawzad Khudhur Saeed. (2025). The Impact of Financial Structure on the Relationship Between Audit Fees and Earnings Management Practices - An Empirical Study on A Sample of Companies Listed on the Iraq Stock Exchange. Tikrit Journal of Administrative and Economic Sciences, 21(71 part 1), 237–272. https://doi.org/10.25130/tjaes.21.71.1.14

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Vol. 21 No. 71 part 1 (2025): vol.21, no 71 part 1 year 2025

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Articles

References

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