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Audit committees and earnings quality

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Abstract:

Abstract

This research investigates whether audit committees are associated with improved earnings quality for a sample of Australian listed companies prior to the introduction of mandatory audit committee requirements in 2003. Two measures of earnings quality are used based on models first developed by Jones (1991) and Dechow and Dichev (2002). Our results indicate that formation of an audit committee reduces intentional earnings management but not accrual estimation errors. We also find differences in the associations between audit committee accounting expertise and the two earnings quality measures. Other audit committee characteristics examined are not significantly related to either earnings quality measure.

Keywords: Audit committees; Corporate governance; Earnings management; Earnings quality; G30; G38; M41

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-629X.2008.00290.x

Affiliations: 1: School of commerce, Faculty of Business, University of the Sunshine Coast, Slippy Downs, 4556, Australia 2: School of Accounting, Economics and Finance, Faculty of Business, University of Southern Queensland, Toowoomba, 4350, Australia

Publication date: June 1, 2009

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