The Effects of Corporate Governance Practices on the Choice between Efficient and Opportunistic Earnings Management

This study aims to explore the preferences of the publicly listed companies on the S&P 500 index regarding their earnings management (efficient or opportunistic) as well as the impact of the corporate governance practices (audit committee, board independence and audit quality) on their decision. Using two separate regression models, it was found that American firms listed on the S&P 500 index tend to conduct efficient earnings management, which is in line with the findings of prior research. Moreover, it emerged that the earnings management selection does not depend on the amount (high vs small) of audit fees paid by the companies. Additionally, the governance practice of employing more outside directors in the audit committees leads to more efficient earnings management. Finally, according to the study results, the impact of discretionary accruals on future profitability is not significantly related to the proportion of independent members on the board of directors.

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PENGARUH EARNINGS MANAGEMENT TERHADAP FUTURE PROFITABILITY TERKAIT DENGAN OWNERSHIP STRUCTURE, FIRM SIZE DAN CORPORATE GOVERNANCE PRACTICES

Media Ekonomi ◽

10.25105/me.v20i2.782 ◽

2017 ◽

Vol 20 (2) ◽

pp. 55

Author(s):

Ikhsan Yudha Asmara ◽

Felizia Arni Rudiawarni

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Ownership Structure ◽

Audit Committee ◽

Audit Quality ◽

Stock Exchange ◽

Manufacturing Sector ◽

The Future ◽

Governance Practices ◽

The Impact

This study aims to determine how the effect of earnings management on future profitability business entity engaged in the manufacturing sector listed on the Indonesia Stock Exchange, and how the effects of the ownership structure, company size, and the practice of corporate governance (proxied by the audit quality, independent board member and audit committee) regarding the impact of earnings management on the future profitability of manufacturing sector enterprises listed on the Stock Exchange. This study used a sample of manufacturing sector companies listed on the Indonesia Stock Exchange in the period 2008-2010. The samples used in this study were 262 observations. The sampling method used was probability sampling - judgment / purposive sampling. Independent variables used in this study are earnings management (proxied by the CFO, NDAC, and DAC), ownership structure (proxied by DFAM and INST), firmsize, and corporate governance practices (proxied by the AUDIT, BOD, and AUDCOM). The dependent variable in this study is the future profitability proxied by the variable "and CFOT earnt + 1 + 1. The results of this study were (1) earnings management proved to have a significant impact on the future profitability of manufacturing sector enterprises. The influence that appears different depending on the proxy used; (2) The ownership structure did not have an influence on the behavior of earnings management related to future profitability of manufacturing sector enterprises; (3) firmsize not affect earnings management behaviors related to future profitability of manufacturing sector enterprises; overall corporate governance practices are not effective in influencing the behavior of earnings management related to the future profitability of manufacturing sector enterprises. Keywords : future profitability, earnings management, ownership structure, corporate governance practice

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The impact of audit quality, corporate governance, and company characteristics on earnings management

Global Journal of Economic and Business ◽

10.31559/gjeb2021.11.1.8 ◽

2021 ◽

Vol 11 (1) ◽

pp. 107-112

Author(s):

Yousef Shahwan

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Audit Committee ◽

Audit Quality ◽

Stock Exchange ◽

Free Cash Flow ◽

Statistical Testing ◽

Return On Assets ◽

Industrial Firms ◽

The Impact

This study aims to investigate empirically how the characteristics of the firm; the audit quality and the corporate governance impact the management of earnings. The population employed in this study is industrial firms listed on the Amman Stock Exchange between 2017 and 2019. The method of sampling employed in this study is purposive sampling. 39 firms are analyzed, with 117 items of data being achieved. Also, this study applies statistical testing via multiple regression. The findings show that sales growth, free cash flow, financial leverage, and return on assets all have an impact on earnings management. Meanwhile, other factors such as audit quality, firm size, audit committee, the board size, institutional ownership, and managerial ownership, have not to impact on earnings management.

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The impact of audit committee effectiveness on audit fees and non-audit service fees

Accounting Research Journal ◽

10.1108/arj-11-2015-0144 ◽

2018 ◽

Vol 31 (2) ◽

pp. 174-191 ◽

Cited By ~ 1

Author(s):

Muhammad Jahangir Ali ◽

Rajbans Kaur Shingara Singh ◽

Mahmoud Al-Akra

Keyword(s):

Audit Committee ◽

Audit Quality ◽

Audit Fees ◽

Audit Committees ◽

Regulatory Requirements ◽

Content Type ◽

Financial Expertise ◽

The Difference ◽

Accounting Expertise ◽

The Impact

Purpose The purpose of this study is to examine the impact of audit committee effectiveness on audit fees and non-audit service (NAS) fees in a less regulatory environment. Design/methodology/approach The authors construct a composite audit committee effectiveness measure incorporating audit committee independence, diligence, size, financial expertise and the chairperson’s accounting expertise. Findings The authors find that audit committee effectiveness has a positive significant impact on both audit fees and NAS fees. This suggests that effective audit committees can hold auditors accountable resulting in better audit quality and consequently higher audit fees. Originality/value The link between more effective audit committees with higher NAS purchases can be explained in light of the difference in regulatory requirements providing audit committees with decision rights on the use of NASs, therefore approving more NAS and increasing NASF. Additional tests and robustness analyses confirm the results.

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The Impact of Audit Committe Characteristics on Audit Quality

Jurnal Akuntansi ◽

10.24912/ja.v23i3.602 ◽

2020 ◽

Vol 23 (3) ◽

pp. 363

Author(s):

Paradisa Sukma, Yustrida Bernawati

Keyword(s):

Audit Committee ◽

Audit Quality ◽

Stock Exchange ◽

Audit Fees ◽

Audit Committees ◽

Observation Data ◽

Manufacturing Companies ◽

Ols Regression ◽

The Impact

This research was conducted to investigate the effect of audit committee characteristics on audit quality. The characteristics of the audit committee used in this study are the number of audit committees, number of audit committee meetings, audit committee education background, and audit committee experience while audit quality is measured using audit fees. This study uses manufacturing companies listed on the Indonesia Stock Exchange in 2016 - 2018 with 70 observation data and uses OLS regression. The results of this study indicate all four Audit Characteristics, only size and experience significantly influence audit quality. While audit meetings and education do not significantly affect audit quality. Likewise with the education that can not ensure the capabilities possessed by members of the audit committee. Overall, the effectiveness of the audit committee has no significant effect on audit quality.

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PENGARUH EARNINGS MANAGEMENT TERHADAP FUTURE PROFITABILITY TERKAIT DENGAN OWNERSHIP STRUCTURE, FIRM SIZE DAN CORPORATE GOVERNANCE PRACTICES

JURNAL INFORMASI, PERPAJAKAN, AKUNTANSI, DAN KEUANGAN PUBLIK ◽

10.25105/jipak.v9i1.4525 ◽

2019 ◽

Vol 9 (1) ◽

pp. 71

Author(s):

Ikhsan Yudha Asmara ◽

Felizia Arni Rudiawarni

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Firm Size ◽

Ownership Structure ◽

Audit Committee ◽

Board Member ◽

Audit Quality ◽

Governance Practices ◽

Governance Practice ◽

Corporate Governance Practice

Penelitian ini bertujuan untuk mengetahui bagaimana pengaruh earnings management terhadap future profitability badan usaha yang bergerak di sektor manufaktur yang terdaftar di Bursa Efek Indonesia, dan bagaimana efek dari struktur kepemilikan, ukuran perusahaan, dan praktik corporate governance (yang diproksikan oleh audit quality, independent board member, dan audit committee) terkait dampak earnings management terhadap future profitability badan usaha sektor manufaktur yang terdaftar di BEI. Penelitian ini menggunakan sampel berupa perusahaan sektor manufaktur yang terdaftar di PT Bursa Efek Indonesia pada periode 2008-2010. Jumlah sampel yang digunakan pada peneiitian ini adalah sebanyak 262 observasi. Metode pengambilan sampel yang digunakan adalah probability sampling — judgment/purposive sampling. Variabel independen yang digunakan pada penelitian ini adalah earnings management (diproksikan oleh CFO, NDAC, dan DAC), ownership structure (diproksikan oleh DFAM dan INST), firmsize, dan corporate governance practice (diproksikan oleh AUDIT, BOD, dan AUDCOM). Variabel dependcn pada penelitian ini adalah future profitability yang diproksikan oleh variabel LIEARNt+1 dan CF0t41. Hasil dari penelitian ini adalah (1) earnings management terbukti pengaruh yang signifikan terhadap future profitability badan usaha sektor manufaktur. Pengaruh yang muncul berbeda tergantung pada proksi yang digunakan; (2) ownership structure ternyata tidak memiliki pengaruh terhadap perilaku earnings management terkait future profitability badan usaha sektor manuiaktur; (3) firmsize tidak mempengaruhi perilaku earnings management terkait future profitability badan usaha sektor manufaktur; corporate governance practice secara keseluruhan tidak efektif dalam mempengaruhi perilaku earnings management terkait future profitability badan usaha sektor manufaktur.

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Effect of Audit Quality on Earnings Management in Insurance Companies in Nigeria e

Athens Journal of Business & Economics ◽

10.30958/ajbe.7-2-4 ◽

2021 ◽

Vol 7 (2) ◽

pp. 173-202

Author(s):

Chizoba Mary Nwoye ◽

Alphonsus Sunday Anichebe ◽

Ifeanyi Francis Osegbu

Keyword(s):

Earnings Management ◽

Financial Institutions ◽

Financial Literacy ◽

Audit Committee ◽

Audit Quality ◽

Financial Institution ◽

Audit Fees ◽

Audit Committees ◽

Insurance Companies ◽

And Performance

The main objective of the study is to determine the effect of audit quality on earnings management in insurance companies in Nigeria with special consideration on accruals and performance measures of earning manipulations using insurance companies in Nigeria. Preliminary analyses were conducted, such as descriptive statistics and correlation matrix. In analyzing the data, the study adopted panel multiple regression to identify the possible effects of audit quality on earnings management of financial institutions in Nigeria We interpreted fixed effect analysis after using Hausman test. The result shows that audit quality had a significant effect on earnings management. We conclude that longer stay of auditors in financial institutions increases accrual and performance manipulation. However, financial institutions audited by the Big 4 auditing firms are associated with less accrual and performance earnings manipulation while financial institutions that have executive and non-executive directors as members of audit committee have greater accrual and performance earnings manipulations. Higher number of financial experts in audit committee increases accrual manipulation while higher number of experts with accounting background in audit committee reduces performance manipulating. Finally, increase in auditors’ fee leads to choices of using accounting methods to manipulate both accrual and performance earnings. Therefore, the study recommends that, financial institutions should have maximum number of years for auditors to stay. They should focus more on increasing the number of experts with accounting background in audit committees. Accounting bodies should regulate auditors’ fee in line with the size of the financial institution. (JEL M42) Keywords: Audit Fees, Audit Committee Independence, Audit Firm Size, Audit Quality, Earnings Management, Financial Literacy of Audit Committee Members, Length of Audit Tenure.

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Value Engineering for the Role of Internal Audit Quality in Activating the Principles of Corporate Governance: A Case of Non-financial Firms on Iraqi Stock Exchange

International Journal of Engineering & Technology ◽

10.14419/ijet.v7i4.7.20531 ◽

2018 ◽

Vol 7 (4.7) ◽

pp. 145

Author(s):

Mohammed Hassan Sabbar ◽

Safa Eltyaf Abdalamer

Keyword(s):

Corporate Governance ◽

Audit Committee ◽

Audit Quality ◽

Stock Exchange ◽

Internal Audit ◽

Value Engineering ◽

Positive Relation ◽

Qualified Person ◽

Governance Practices ◽

The Impact

The main purpose of this study is to investigate the impact of the quality of internal audit on the effectiveness of corporate governance in Iraqi listed firms. The frequency of audit committee meeting and board size are in a negative and significant relationship of the audit committee and firm size are only variables which in negative relation with corporate governance index. Whereas all the other variables which independence of audit committee are, qualification if independent director in audit committee and audit committee to board independence are in positive relation to corporate governance. The results indicate that along with independence its mandatory to have qualified person on a board committee. Similarly, the frequency of audit committee also appears in positive relation to corporate governance practices for the sample of Iraqi firm. The results of the study provide support with agency theory. This study will be helpful for policymakers and corporate heads in formulating policies related to development and implementation of corporate governance.

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Assessment of Factors Affecting Audit Quality: “A Study of Selected Companies Listed on the Ghana Stock Exchange”

International Journal of Accounting and Financial Reporting ◽

10.5296/ijafr.v9i2.14692 ◽

2019 ◽

Vol 9 (2) ◽

pp. 436

Author(s):

John Kwaku Mensah Mawutor ◽

Borketey-La Francis B ◽

Asamoah Douglas Obeng

Keyword(s):

Audit Committee ◽

Audit Quality ◽

Negative Impact ◽

Stock Exchange ◽

Audit Fees ◽

Audit Committees ◽

Cross Sectional ◽

Factors Affecting ◽

Ghana Stock Exchange ◽

The Impact

This study sought to establish the factors affecting audit quality in listed companies in Ghana. A cross-sectional method was used in the analysis in which a linear regression model was also used to establish the impact of the independent variables namely; auditor size, the existence of audit committee and the logarithm of the auditor fees on the independent variable audit quality. The logarithm of audit fees was taken to normalize the data. The dependent variable “leverage ratio” (total debts divided by total assets of the company) used to measure debt pressure by the companies and also used as a proxy for the audit quality because high debts in relation to company assets can lead to bankruptcy. Twenty- five (25) companies listed on the Ghana Stock exchange were used as the sample of the study. The results of the analysis indicated that logarithm of audit fees, existence of audit committee, and auditor size were all significant in influencing the leverage of the companies and thus audit quality. The size of audit firm had a negative impact on audit quality, while the companies that do not have audit committees are more likely to have poor audit quality. The logarithm of audit fees was positively related with the audit quality. It is recommended that audit fees should be regulated by The Institute of Chartered Accountants Ghana (ICAG) as well as taking action against audit companies which do not adhere to auditing standards and the officials of companies who are involved in misstating the financial statements and other financial records with the intention of concealing the true and actual facts of the financial position of the company.

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Impact of Audit Committee and Audit Quality on Preventing Earnings Management in the Pre- and Post- Nigerian Corporate Governance Code 2011

Procedia - Social and Behavioral Sciences ◽

10.1016/j.sbspro.2015.01.415 ◽

2015 ◽

Vol 172 ◽

pp. 651-657 ◽

Cited By ~ 11

Author(s):

Nuraddeen Usman Miko ◽

Hasnah Kamardin

Keyword(s):

Corporate Governance ◽

Earnings Management ◽

Audit Committee ◽

Audit Quality ◽

Corporate Governance Code

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The impact of audit committee characteristics on internal audit professionalization: empirical evidence from Greece

Accounting Research Journal ◽

10.1108/arj-05-2020-0091 ◽

2021 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Christina Vadasi ◽

Michalis Bekiaris ◽

Andreas G. Koutoupis

Keyword(s):

Empirical Evidence ◽

Audit Committee ◽

Audit Quality ◽

Research Question ◽

Internal Audit ◽

Audit Committees ◽

Annual Reports ◽

Substantial Impact ◽

Content Type ◽

The Impact

Purpose This paper aims to provide empirical evidence of the association between audit committee characteristics and internal audit quality through internal audit professionalization. Design/methodology/approach The investigation of the research question was based on 45 usable responses that were received from a survey of chief audit executives from firms listed on the Athens Stock Exchange and combined with publicly available information from annual reports. Findings The results indicate that audit committee characteristics (independence, diligence through frequent meetings and interaction with internal audit through valuation) influence internal audit professionalization. In addition, they demonstrate that internal audit professionalization is also influenced by CEO duality and firm’s external auditor. Practical implications The findings of this study have implications for audit committees wishing to improve their overall effectiveness, by identifying areas with substantial impact on internal audit quality. Moreover, regulators of corporate governance bodies can also benefit from the results to strengthen audit committee’s efficiency regarding internal audit function oversight. Originality/value The results add to the literature on the discussion of internal audit professionalization and complement the work of other researchers in the field of audit committee’s impact on internal audit quality/effectiveness. This study attempts to fill a gap in the literature on the effect of audit committee characteristics on internal audit professionalization, an element introduced from an institutional theory perspective.

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