With respect to our second smoothing test, we determine
the Spearman correlation coefficient among the
unexplained accruals and cash flows and report the summarized
results in Table 5. The mean coefficients are negative
both before and after the standard-setting events,
as expected. The differences in the correlation coefficients
between the before and after periods for each accounting
standard are positive for 8 of the 12 accounting standards.
The mean difference (0.039) is also positive. The less negative
correlation suggests higher accounting quality as
the strength of the negative correlation between cash flows
and earnings decreases, which suggests less smoothing