Relationship between Earnings Quality and External Audit Quality

The concept of earnings quality is fundamental in accounting and financial economics. Yet, there are deep disagreements about how to define and measure it. The list of candidate measures is long: earnings persistence, predictability, asymmetric loss recognition, various forms of benchmark beating, smooth earnings, magnitude of accruals, income-increasing accruals, absolute value of discretionary or abnormal accruals, and the extent to which accruals map into cash flows.

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