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Audit Committee, Board of Director Characteristics, and Earnings Management

Posted: 26 Aug 2002  

April Klein

New York University (NYU) - Department of Accounting

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Abstract

This study examines whether audit committee and board characteristics are related to earnings management by the firm. A negative relation is found between audit committee independence and abnormal accruals. A negative relation is also found between board independence and abnormal accruals. Reductions in board or audit committee independence are accompanied by large increases in abnormal accruals. The most pronounced effects occur when either the board or the audit committee is comprised of a minority of outside directors. These results suggest that boards structured to be more independent of the CEO are more effective in monitoring the corporate financial accounting process.

Keywords: audit committee, board of directors, earnings management, abnormal accruals

JEL Classification: K22, G34, M41, M43, M49

Suggested Citation

Klein, April, Audit Committee, Board of Director Characteristics, and Earnings Management. Journal of Accounting and Economics, Vol. 33, No. 3, August 2002, pp. 375-400. Available at SSRN: https://ssrn.com/abstract=316695

April Klein (Contact Author)

New York University (NYU) - Department of Accounting ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012
United States

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