Purpose – The purpose of this paper is to examine the empirical association between expected and unexpected audit fees and reported earnings quality for a sample of Big 4(5) client companies over a period from 2000 to 2005. Design/methodology/approach – The paper employs a cross-sectional...

This paper examines the potential impacts of artificial smoothing (abnormal accruals) and real smoothing (derivatives) on firm value. We find that the value of the firm decreases with the magnitude of abnormal accruals and increases with the level of derivative use. Moreover, the accrual...