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Do Audit Committee and Characteristics of Board of Directors Influence Earnings Management?

38 Pages Posted: 11 Mar 2014  

Jagdish Pathak

University of Windsor - Odette School of Business

Khondkar Karim

University of Massachusetts Lowell - The Robert J. Manning School of Business

Sang-Hyun Suh

University of Massachusetts Lowell; Syracuse University

Xiang Ziwen

University of Glasgow - Adam Smith Business School

Date Written: March 1, 2014

Abstract

Earnings management has attracted much attention in this globalized economic environment due to large accounting scandals such as Enron and WorldCom. National governments and other market-regulation institutions are taking measures to restrain earnings management in order to ensure the reliability and transparency of financial reporting. This study explores whether audit committees and boards of directors influence earnings management using the literary review method. The findings show that both discretionary accruals and abnormal accruals are mostly used as dependent variables to detect earnings manipulation estimated by the Jones and Modified Jones Models. For the most part, evidence from previous literatures indicates that the more independent the members of the audit committee and board, the higher the quality of earnings in financial reporting. However, some opposite findings exist.

Keywords: earnings management, audit committee independence, board of directors, discretionary accruals, modified Jones model

JEL Classification: M40, M41

Suggested Citation

Pathak, Jagdish and Karim, Khondkar and Suh, Sang-Hyun and Ziwen, Xiang, Do Audit Committee and Characteristics of Board of Directors Influence Earnings Management? (March 1, 2014). Available at SSRN: https://ssrn.com/abstract=2406080 or http://dx.doi.org/10.2139/ssrn.2406080

Jagdish Pathak (Contact Author)

University of Windsor - Odette School of Business ( email )

401 Sunset
Windsor N9B 3P4, Ontario
Canada
519-253-3000 ext. 3131 (Phone)
519-973-7073 (Fax)

HOME PAGE: http://www.jagdishpathak.com

Khondkar Karim

University of Massachusetts Lowell - The Robert J. Manning School of Business ( email )

One University Avenue
Lowell, MA 01854
United States

Sang-Hyun Suh

University of Massachusetts Lowell ( email )

1 University Ave
Lowell, MA 01854
United States

Syracuse University ( email )

900 S. Crouse Avenue
Syracuse, NY 13244-2130
United States

Xiang Ziwen

University of Glasgow - Adam Smith Business School ( email )

Glasgow, G12 8QQ, UK

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