Audit committee effectiveness, audit quality and earnings management: a meta-analysis

2016 ◽  
Vol 58 (2) ◽  
pp. 179-196 ◽  
Author(s):  
Zgarni Inaam ◽  
Halioui Khamoussi
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Audit Quality ◽  
Good Governance ◽  
Meta Analysis ◽  
Negative Relationship ◽  
Real Earnings Management ◽  
Institutional Setting ◽  
Content Type

Purpose – Many researchers, in several contexts, have investigated the influence of audit committee effectiveness and audit quality variables on reducing the extent of earnings management, and empirical evidence is rather inconsistent. Design/methodology/approach – The aim of this paper is to meta-analyze the results of 58 prior studies that examined whether differences in results are related to moderating effects associated with corporate governance mechanisms or measures of earnings management. Findings – The findings show that the meta-analysis identifies many significant relationships. The independence of the audit committee, its size, expertise and the number of meetings have a negative relationship with earnings management. Similar negative relationships exist between auditor size, specialization and earnings management. Research limitations/implications – This study contributes to the corporate governance literature. Further, recognizing the function of an audit committee and audit quality shows the value of considering an institutional setting in governance research. This study is significant to academic and practitioner literatures, policy makers and professional accounting bodies as it shows that governance reforms promote companies to adopt good governance practices. The results also give useful information to investors in examining the effect of audit committee characteristics and audit quality on earnings quality. Originality/value – This study extends existing research on audit committee and audit quality to oversee both accrual and real earnings management using meta-analysis. Thus, this study has the potential to help stakeholders, board of directors, regulators and auditors, who are related with enhancing the supervision of firms and reducing the opportunities given to managers, to engage in earnings management.

The Effect of Board of Director Composition and Audit Committee Expertise on The Real Earnings Management in Indonesia

2020 ◽  
Vol 2 (1) ◽  
pp. 110-117
Author(s):  
Feby Astrid Kesaulya ◽  
Weny Putri ◽  
Dewi Sri
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Good Governance ◽  
Real Earnings Management ◽  
The Real ◽  
Board Of Director ◽  
Good Corporate Governance ◽  
Board Director ◽  
Real Activities Manipulation

The Objective of this research was to prove that the implementation of good corporate governance will have an effect on the real activities manipulation which was done by the management. The implementations of good governance used by this research are board of director composition and audit committee expertise. This research was conducted in Indonesia by using 306 firm years’ observations. The result of this research showed a different result from previous researches. This research showed that the implementation of good corporate governance in the form of board director composition and audit committee expertise do not impact the practice of real activities manipulation. Or, in other words some of the good corporate governance tool could not mitigate the real activities manipulation in the company.

Audit committee and financial reporting quality: the moderating effect of audit quality

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sana Mardessi
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Moderating Effect ◽  
Real Earnings Management ◽  
Financial Reporting Quality ◽  
Content Type ◽  
The Relationship

Purpose The purpose of this study is to address the impact of audit quality on financial reporting quality proxied by real earnings management. To further clarify the mentioned links, this study empirically assesses the moderating effect of audit quality. Design/methodology/approach The study is based on a sample consisting of 90 non-financial companies that are listed in the Amsterdam stock exchange in AEX all share index over the 2010–2017 period. This study applies a quantitative approach and secondary data as the main source of information for analysis. This paper performs an ordinary least squares regression to examine the moderating effect of audit quality on the relationship between financial reporting quality. Findings Empirical findings demonstrate that corporate governance mechanism, mainly independence members, financial expert and audit committee size has a statistically significant relationship with real earnings management. However, the effect of audit committee meetings on real earnings management is not significant. There is also evidence that audit quality moderates the audit committee – real earnings management links. Originality/value This study extends the existing literature by examining the moderating effect of audit quality on the relationship between financial reporting quality proxied by real earnings management in the Dutch context.

scholarly journals Pengaruh Corporate Governance, Profitabilitas, Leverage, dan Kualitas Audit Terhadap Real Earnings Management

2018 ◽  
Vol 2 (1) ◽  
pp. 35
Author(s):  
Clarissa Maya Devi
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Audit Committee ◽  
Audit Quality ◽  
Stock Exchange ◽  
Total Sample ◽  
Real Earnings Management ◽  
Manufacturing Company ◽  
Corporate Governace

 Abstract :The purpose of this study is to examine the affects of corporate governace, profitability, leverage and audit quality on real earnings management in manufacturing company  listed in Indonesia Stock Exchange during period 2014 until 2016. The total sample of this research was 63 manufacture companies. The result of this research shows that   profitability and audit quality has positive and significant affects on real earnings management, but corporate governance   and leverage has no effect on real earnings management. Keywords :Real Earnings Management, Corporate Governance, Audit Committee Meetings, Audit Committee of Accounting Experts, Profitability, Leverage, Audit Quality.

scholarly journals A meta-analysis of the association between earnings management and audit quality and audit committee effectiveness

2008 ◽  
Vol 6 (Special Issue 1) ◽  
pp. 48-56
Author(s):  
Mark I. Hwang ◽  
Jerry W. Lin
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Empirical Evidence ◽  
Audit Committee ◽  
Audit Quality ◽  
Meta Analysis ◽  
Important Research ◽  
Analysis Techniques ◽  
Research Stream

Earnings management is of great concern to corporate stakeholders. While numerous studies have investigated various determinants of earnings management relating to corporate governance and audit quality, empirical evidence on their effects is rather inconsistent. Employing meta-analysis techniques, this research integrates and evaluates results from 27 prior studies. All eleven variables examined show a significant effect on earnings management. Researchers are encouraged to build on our results to continue this important research stream.

Effective audit committee, audit quality and earnings management

2016 ◽  
Vol 6 (2) ◽  
pp. 138-155 ◽  
Author(s):  
Inaam ZGARNI ◽  
Khmoussi HLIOUI ◽  
Fatma ZEHRI
Keyword(s):  
Earnings Management ◽  
Financial Reporting ◽  
Audit Committee ◽  
Audit Quality ◽  
Reporting Quality ◽  
Ordinary Least Squares ◽  
Financial Reporting Quality ◽  
Institutional Setting ◽  
Financial Security ◽  
Content Type

Purpose – A steady stream of literature has examined relationships between audit committee effectiveness, audit quality and financial reporting quality. The purpose of this paper is to connect these various streams of research to provide an empirical evidence from an Arabic emergent country namely Tunisia. This study examines the role of audit committee effectiveness and audit quality on financial reporting quality particularly to mitigate the earnings management in the Tunisian companies before and after financial security law adoption. Design/methodology/approach – The study uses ordinary least squares regression model to investigate the effect of audit committee characteristics, audit quality attributes and the interaction between these two overseeing mechanisms on earnings management for a sample of 29 non-financial listed Tunisian firms during the period 2001-2009. Findings – The results document a substitute effect between the presence of Big Four auditor and effective audit committee in order to reduce the discretionary accruals before the enforcement of law no. 2005-96 dealing with the financial securities. The authors find a complementarity link between the score of audit committee’s effectiveness and auditor industry specialization’s to constrain earnings management. Finally, the findings show a complementary relation between audit committee’s effectiveness and audit tenure, after the passage of the law. Research limitations/implications – This study shows the value of considering the institutional setting in governance research. This paper is restricted to firms in the Tunisia from 2001 to 2009. Future research should investigate this issue in other settings and periods. Practical implications – This study is important to practitioner and academic literature, policy makers and professional accounting bodies as it shows that legislative reforms can enhance companies to adopt good governance practices in emerging countries. The results also give useful information to investors in examination the effect of audit committee characteristics and audit quality on earnings quality. Another interesting practical focus of this study is to assess how successful was the implementation of financial security law in improving audit transparency and support shareholder involvement in the audit process. Originality/value – The results suggested that governance regulation is a substitute for strong governance mechanisms in both the pre- and post-law periods.

scholarly journals THE EFFECT OF GOOD CORPORATE GOVERNANCE AND FINANCIAL DISTRESS ON REAL EARNINGS MANAGEMENT

2021 ◽  
Vol 11 (3) ◽  
pp. 285-306
Author(s):  
Santi Yopie ◽  
Erika - Erika
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Distress ◽  
Audit Committee ◽  
Audit Quality ◽  
Test Validity ◽  
Real Earnings Management ◽  
Family Ownership ◽  
Validity And Reliability ◽  
Good Corporate Governance

This research aims to analyze the effect of good corporate governance and financial distress on real earnings management. The sample in this study is a manufacturing company listed on Indonesia Stock Exchange for the 2016-2020 period. Data collection in this study was carried out using secondary data taken from the company's financial statement. The data were analyzed and tested using the SPSS 25 program to test descriptive statistics and outlier tests. The Smart PLS 3.0 program was used to test validity and reliability, test quality indexes, and test hypotheses. The results of this study indicate that institutional ownership has a significant effect on real earnings management, managerial ownership has no significant effect on real earnings management, family ownership has no significant effect on real earnings management, the audit committee has a significant effect on real earnings management, audit quality has a significant effect on management. Financial distress has a significant effect on real earnings management. The moderating variable in this study proves that family ownership has no significant effect on real earnings management which is moderated by political connections.  

Role of corporate governance in constraining earnings management practices: a study of select Indian and Chinese firms

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Aprajita Pandey ◽  
J.K. Pattanayak ◽  
Prakash Singh
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Management Practices ◽  
Audit Quality ◽  
Least Square ◽  
Real Earnings Management ◽  
Chinese Stock Market ◽  
Content Type ◽  
Country Level ◽  
The Impact

Purpose The purpose of this paper is to investigate the effect of corporate governance on both accrual-based and real earnings management practices in select firms of the two world's largest economies, i.e. India and China. Design/methodology/approach The study has implemented a feasible generalized least square regression (FGLS) method to analyse the effect of corporate governance on accrual-based and real earnings management. Findings The study exhibits the significant contribution of large board sizes and independent boards in constraining the use of both accruals as well as real earnings management practices. However, audit quality had an impact on accrual earnings management only. The study also documents that accrual earnings management practices are controlled when the government’s potential to develop and enactment of policies increases. Practical implications The findings of the study provide insights to analysts, prospective investors and regulators to evaluate the effectiveness of the board in a new issue firm and help the firm to enhance its corporate governance policies. Originality/value Unlike previous studies who mostly examined the impact of corporate governance factors on accrual earnings management, the present study has, first, considered both accruals as well as real earnings management. Second, the present study has used the unique sample of new issue firms listed on the Indian and Chinese stock market, and third, the study did an additional analysis to examine the impact of country-level governance factors on accrual earnings management.

Does audit committee substitute or complement other corporate governance mechanisms

2017 ◽  
Vol 32 (7) ◽  
pp. 658-681 ◽  
Author(s):  
Yousef Hassan ◽  
Rafiq Hijazi ◽  
Kamal Naser
Keyword(s):  
Corporate Governance ◽  
Ownership Structure ◽  
Audit Committee ◽  
Negative Relationship ◽  
Governance Mechanisms ◽  
Governance System ◽  
African Countries ◽  
Content Type ◽  
Board Characteristics ◽  
Corporate Governance Mechanisms

Purpose The purpose of this paper is to examine the relation between audit committee (AC) and a set of other corporate governance mechanisms in one of the emerging economies, United Arab of Emirates (UAE). In particular, the current study examines whether an effective AC can serve as a substitute or as a complement mechanism to board characteristics and ownership structure of Emirati listed non-financial companies. Design/methodology/approach Using substitution and complementary theories, a panel data from 48 nonfinancial companies listed on the UAE Stock Exchanges [Abu Dhabi Stock Exchange and Dubai Financial Market] during the period between 2011 and 2013 were used in the current study. A composite measure of four proxies has been used to measure the AC effectiveness, namely, AC size, independence, financial expertise and diligence. To test the hypotheses formulated for the study, a logistic regression model was used to identify the influence of a set of board characteristics and ownership structure variables on the effectiveness of the AC after controlling for firm size, auditor type, industry type and profitability. Findings While AC effectiveness appeared to be positively associated with board size and board independence, it is negatively associated with CEO duality. This points to a complementary governance relation. On the other hand, the negative relationship between AC effectiveness and each of institutional and government ownership suggests substitutive relations. Research limitations/implications The main shortcoming of the current study is that it examines the influence of a certain set of corporate governance factors on the effectiveness of AC. Other corporate governance mechanisms may, however, contribute to the effectiveness of AC. The findings of the study can be used by companies’ managements and regulators in the UAE to improve the corporate governance system. Originality/value To the best of researchers’ knowledge, this study provides the first evidence about the interaction among multiple governance mechanisms required by the code of corporate governance issued by the UAE Ministry of Economy in 2009. The current paper is expected to add to the limited AC literature in Middle East and North African countries in general and Arab World in particular.

scholarly journals Political and financial background in board interlocking and earnings management in Brazil

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Cristian Baú Dal Magro ◽  
Roberto Carlos Klann
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Financial Reporting ◽  
Management Practices ◽  
Accounting Information ◽  
Real Earnings Management ◽  
The Political ◽  
Content Type ◽  
Quality Of Accounting Information

Purpose Although board interlocking underlying forces are largely hidden, the purpose of this paper is to provide managers, auditors, analysts, regulators and other stakeholders with sociological board interlocking information considering the different backgrounds of their members. Design/methodology/approach The research sample gathered 1,606 observations from 2010 to 2017. For data analysis, the direct and indirect board interlocking linkages, considering the different backgrounds of board members, established the centrality indicators. Subsequently, the authors used these indicators according to each measured background in the regression models. Findings The results indicate that the political background of board interlocking members is positively related to real earnings management practices, while the financial background has a mitigating effect on such practices. Research limitations/implications The findings suggest that individual skills and interests conveyed across the corporate social network have shaped corporate governance, with distinct impacts on the quality of accounting information. Practical implications The authors conclude that both backgrounds could have implications on agency conflicts, increasing (policy) or reducing (financial) information asymmetry between the company and its various stakeholders, which indicates that the authors must consider sociological and not just economic aspects within corporate governance. Social implications The sociological background of individuals is necessary for the congruence of monitoring mechanisms, and consequently, the quality of accounting information. Originality/value This study examines the influence of the political and financial background of board interlocking members on real earnings management practices in Brazilian publicly traded companies in the International Financial Reporting Standards post-adoption period.

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