The Libyan external auditor’s awareness of profit management methods

A field study on auditors of the Audit Bureau and external audit offices

Abstract

Objective: The study seeks to determine the level of awareness among auditors of Libyan Audit Bureau and the auditors in the external auditing offices of earning management methods that affect corporate financial statements, and consequently ascertain whether there is any significant differences regarding their awareness. Methodology: The researchers relied on the descriptive analytical method to test research hypotheses. Appropriate statistical methods were used in analysing research data and extracting the results, including the mean, standard deviation and t-test for the two independent samples at a significant level (0.05). Results: The empirical results of the study show that the auditors of Libyan Audit Bureau and of the external audit offices are generally somewhat aware of the methods of earnings management affecting corporate financial statements (i.e., income statement, statement of financial position and statement of cash flows). In addition, this study finds that there are no significant differences between respondents' perceptions regarding the awareness of methods of earnings management affecting information in the financial statements. Contribution: This study is considered one of the studies that dealt with one of the important and recent topics in our time, which is earnings management. This study has highlighted the external auditor's awareness of the methods of profit management that can negatively affect information presented in corporate financial statements. Study limits: The study was limited to the awareness of auditors of the Audit Bureau and audit offices in Libya of earnings management methods that affecting the information published in the three main financial statements (income statement, statement of financial position, and statement of cash flows).