70 International Journal of Sustainable Economies Management, 2(2), 70-100, April-June 2013 Copyright © 2013, IGI Global. Copying or distributing in print or electronic forms without written permission of IGI Global is prohibited. ABSTRACT Material weaknesses in the internal control system of a company create more opportunities for managers to engage in opportunistic earnings management. In this study the authors investigate the relation between earnings management and disclosed material weaknesses in the internal controls, both under SOX 302 and SOX 404, and examine whether audit quality, measured as being audited by a Big Four auditor, has an effect on that relation. The results suggest that material weakness frms have more absolute discretionary accruals and greater income-decreasing discretionary accruals. So evidence is provided that material weakness frms engage in more earnings management, however not in opportunistic income-increasing earnings management. When audit quality is high, measured as being audited by a Big Four auditor, the disclosed material weak- nesses are lower just as total and absolute discretionary accruals are. It is also interesting in our fndings that when material weakness frms are audited by a Big Four auditor a positive relationship seems to exist with discretionary accruals, suggesting that when a frm is audited by a Big Four auditor, material weaknesses in the internal controls will lead to opportunistic earnings management. Does Audit Quality Infuence the Relation between Earnings Management and Internal Control Weakness in the Post –SOX Period Judith van Ravenstein, PricewaterHouseCoopers, Amsterdam, Netherlands Georgios Georgakopoulos, Department of Financial Accounting, University of Amsterdam, Amsterdam, Netherlands Petros Kalantonis, Department of Financial Accounting, Technological Education Institute (TEI) of Piraeus, Athens, Greece Panagiotis Kaldis, Department of Applied Economics and Marketing, Technological Education Institute of Athens, Athens, Greece Keywords: Audit Quality, Big Four Auditor, Discretionary Accruals, Earnings Management, Material Weakness DOI: 10.4018/ijsem.2013040105