Fraud Motives and Opportunities Factors on Earnings Manipulations

This study examines the relationship between fraud motives (leverage and dividend), opportunities (audit quality and free cash flow) and earnings management. A sample of 230 firm years from six industrial sectors listed on the main board of Bursa Malaysia for the years 2009 and 2010. The study finds that dividend, audit quality and free cash flow provide significant constraints to accruals earnings management. High audit fees limit accruals earnings management. Results are in favour of stakeholders who rely on the external audit to oversee the integrity of corporate financial reporting by reducing earnings management.