Audit Fees under Dual Earnings Management: The Moderating Role of Accruals in the REM-Audit Fee Nexus

As financial reporting becomes increasingly complex, both real earnings management (REM) and accrual-based earnings management (AEM) pose challenges for auditors in risk assessment and fee determination. While prior studies have examined these strategies in isolation, scant attention has been paid to their concurrent use, dual earnings management, particularly in audit pricing. Existing literature lacks analyses of the REM–AEM interaction within moderating frameworks, leaving unclear how AEM intensity moderates the REM–audit fee relationship. This gap impedes understanding of audit pricing in information-asymmetric settings and may lead to suboptimal audit judgments. To address this gap, this study investigated how AEM moderates the relationship between REM and audit fees. The study offered three novelties. First, it is the first in the domestic literature to examine the REM–AEM interaction. Second, it treated AEM as a moderator, revealing how auditors respond to compounded informational risk. Third, it provided evidence from the Iranian capital market, offering a practical framework for audit risk assessment in low-transparency environments. Using data from ۷۲ firms listed on the Tehran Stock Exchange (۲۰۱۳–۲۰۲۵), results indicated a positive and significant relationship between REM and audit fees. A negative and significant interaction between REM and AEM emerges only when AEM is measured by the Kothari model. Results showed that using both strategies simultaneously affects auditors’ risk perceptions and weakens REM’s direct impact on audit fees. The study contributed to audit pricing theory by bridging behavioral and signaling perspectives, and presents practical implications for auditors as well as regulators and standard-setters

کلیدواژه ها:

Accrual Earnings Management ، Audit fees ، Dual Earnings Management ، real earnings management ، Moderating Role