Board Characteristics, Audit Committee Characteristics and Abnormal Accruals
Michael E. Bradbury
Yuen Teen Mak
National University of Singapore (NUS) - Department of Accounting
affiliation not provided to SSRN
Prior research examines the relation between board characteristics and financial reporting violations relating to fraud and earnings overstatement. This paper examines the relation between governance (as measured by board and audit committee characteristics) and accounting quality (as measured by abnormal accruals) where there is no a priori reason to suspect systematic management of earnings. We find both board size and audit committee independence are related to higher quality accounting (i.e., lower abnormal working capital accruals). Furthermore, the relation between audit committee independence and higher quality accounting exists only when the abnormal accruals are income increasing. This suggests that audit committees are effective in the financial reporting process by reducing the level of income increasing abnormal accruals. The results also indicate that audit committees are effective only when they comprise independent directors.
Number of Pages in PDF File: 29
Keywords: Audit committee, board characteristics, abnormal accruals
JEL Classification: G34, M41, M43, M49working papers series
Date posted: May 18, 2004
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo1 in 0.688 seconds