Title

The effect of audit committee performance on earnings quality.

SelectedWorks Author Profiles:

Wenshan Lin

Document Type

Article

Publication Date

2006

ISSN

0268-6902

Abstract

Purpose – The role of audit committees in ensuring the quality of corporate financial reporting has come under considerable scrutiny due to recent high-profile “earnings management” cases and the collapse of Enron. The purpose of this paper is to examine the association between the characteristics of audit committees (size, independence, financial expertise, activity, and stock ownership) and earnings restatement – a direct measure of earnings management. Design/methodology/approach – Univariate correlations and multivariate statistical analyses are performed. In particular, a multivariate logistic regression model is used. Findings – Evidence suggests a negative association between the size of audit committees and the occurrence of earnings restatement. The remaining four audit committee characteristics are not found to have a significant impact on the quality of reported earnings. Research limitations/implications – This study focuses on the fiscal year 2000 only. As data become available for more fiscal years, future studies may re-examine the issue. Originality/value – Results of this research provide useful information for the accounting profession, the regulators and corporations on the effective practice of audit committees.

Comments

Citation only. Full-text article is available through licensed access provided by the publisher. Members of the USF System may access the full-text of the article through the authenticated link provided.

Publisher

Emerald

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.