| Summary: | The incessant manipulations of corporate financial statements globally in the past few years have led to several scandals and failur s. This phenomenon has resulted in serious
threats to the reliability of financial reporting and external audit arising from lack of integrity and credibility of audited financial statements. This is attributed to the
negligence and inability of external auditors to alert shareholders of such manipulation and misleading in the financial statements and reporting ofthese violations. The decrease
in the financial reporting quality (FRQ) is mostly attributed to the increasing of discretionary accruals estimated by the management. Hence, the current study aimed at
investigating the influence of the external auditor's characteristics and corporate governance (CG) mechanisms on the arning management and FRQ, and the mediating
effect of the audit quality on these relationships in the Jordanian context. The secondary data of 180 public-list d firms in Amman Stock Exchange from 2009 until 2017 were
gathered through annual reports of the companies and Datastream databa . Multiple regression technique and diagnostic analysis were performed to test all assumptions for
the data to be valid. In this study, discretionary accruals (DACC) are used as a measurement of FRQ, giv n that the DACC capture the earnings management and thus,
provides an inverse proxy for FRQ. By using balanced panel data and an econometric analysis to select the best method among the Fixed, Random or Pooled OLS Effects
through Eviews software, the Fixed Effect is found to be the best specification method for all of the study models. Findings of the first model indicated that auditor size, indu tr
specialization auditor tenure, board size, board independence, directors' remunerations, family and directors' ownership have significantly given impact on FRQ. Meanwhile
board expertise, institutional and managerial ownership have insignificant impact on FRQ. Findings of the second model showed that industry specialization, auditor tenure,
board size, expertise, directors' remunerations, directors ownership, institutional and managerial ownership have significant effects on audit quality. While auditor size, board
indep ndence and family ownership have insignificant influence on audit quality. Finally, in terms of the mediating effect in the third model, the study employed two
complementary methods, namely the Causal Steps Method and the Sobel test. The results of the mediation model revealed that audit quality mediates the relationship between CG
I gchanisl11s and FRQ. The CUlT nt study created new understanding and perspective of th interaction between ownership structure, auditor's characteristics, board components,
audit quality, earnings management and FRQ. The findings are important to the policy makers, professionals and regulatory bodies, especially with regards to external audit
quality and mandating and developing of the CO mechanisms. These findings can be applied to other developing countries that have similar economic and political
environment with Jordan.
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