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The effect of audit committee characteristics on earnings management: the case of Indonesia

Author

Listed:
  • Doddy Setiawan
  • Lian Kee Phua
  • Hong Kok Chee
  • Irwan Trinugroho

Abstract

We investigate the effectiveness of audit committee in mitigating earnings management in the context of Indonesia. Audit committee is expected to reduce earnings management. This study examines the effect of several audit committee characteristics: independence of audit committee members, number of audit committee members, number of meetings, expertise in finance and gender on earnings management. We study 393 Indonesian listed firms during the 2006-2010 period. Results show that female member(s) of audit committee mitigate earnings management. However, financial expertise and number of meetings have positive effect on earnings management. This result shows that both variables might not be effective to constraint earnings management. On the other hand, number of audit committee members and independence of audit committee member do not have any significant influence on earnings management. Further, this study shows that audit firms and leverage have negative effect on earnings management. However, institutional investors tend to push earnings management higher and growth has no significant effect on earnings management.

Suggested Citation

  • Doddy Setiawan & Lian Kee Phua & Hong Kok Chee & Irwan Trinugroho, 2020. "The effect of audit committee characteristics on earnings management: the case of Indonesia," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 10(4), pages 447-463.
    • Handle: RePEc:ids:afasfa:v:10:y:2020:i:4:p:447-463
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    Cited by:

    1. Haruna Usman & Tosin Olushola & Amina S. Mohammed, 2022. "Impact of Audit Committee Characteristics on Earning Management of Listed Consumer Goods Companies in Nigeria (2011-2020)," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(9), pages 349-358, September.
    2. Ayman Shehadeh & Mahmoud Daoud Daoud Nassar & Husam Shrouf & Mohammad Haroun Sharairi, 2024. "How Audit Fees Impact Earnings Management in Service Companies on the Amman Stock Exchange through Audit Committee Characteristics," IJFS, MDPI, vol. 12(2), pages 1-16, March.

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