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The Impact of Audit Quality and Female Audit Committee Characteristics on Earnings Management: Evidence from the UK

Author

Listed:
  • Naila Amara

    (Department of Accounting and Finance at IHEC, University of Sousse, Sousse 4056, Tunisia)

  • Saad Bourouis

    (Department of Accounting and Finance at IHEC, University of Sousse, Sousse 4056, Tunisia)

  • Sajead Mowafaq Alshdaifat

    (Financial and Accounting Sciences Department, Faculty of Business, Middle East University, Amman 11831, Jordan)

  • Houssam Bouzgarrou

    (Department of Accounting and Finance at ISFF, University of Sousse, Sousse 4054, Tunisia)

  • Hamzeh Al Amosh

    (Department of Financial Intelligence, University of South Africa, Pretoria 0002, South Africa
    Jadara University Research Center, Jadara University, Irbid 21110, Jordan)

Abstract

This study explores the impact of audit quality and the proportion of women on an audit committee on earnings management. Moreover, we examined how age diversity and the presence of non-foreign women on audit committees influence earnings management. Our study utilizes data from 165 UK-based listed companies between 2011 and 2021. A combination of static and dynamic analysis was used to empirically reveal our results. The results show a negative and significant relationship between audit quality and earnings management, as per the Kothari model. The presence of a female audit committee does not affect earnings management. However, when we control for demographic variables like age and nationality, we found that non-foreign female members of the audit committee reduced earnings management, while age diversity among female members had no effect. Additional analysis using the Dechow model revealed that both the presence of a female audit committee and their nationality affected earnings management. Our findings contribute to ongoing discussions on corporate governance by providing evidence that female audit committees and audit quality influence earnings management in UK-listed companies. This study is one of the few that examines demographic attributes (e.g., nationality or age).

Suggested Citation

  • Naila Amara & Saad Bourouis & Sajead Mowafaq Alshdaifat & Houssam Bouzgarrou & Hamzeh Al Amosh, 2025. "The Impact of Audit Quality and Female Audit Committee Characteristics on Earnings Management: Evidence from the UK," JRFM, MDPI, vol. 18(3), pages 1-20, March.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:3:p:136-:d:1605502
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    References listed on IDEAS

    as
    1. Ghafran, Chaudhry & O'Sullivan, Noel & Yasmin, Sofia, 2022. "When does audit committee busyness influence earnings management in the UK? Evidence on the role of the financial crisis and company size," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    2. Ammar Ali Gull & Muhammad Atif & Ayman Issa & Muhammad Usman & Muhammad Abubakkar Siddique, 2021. "Female CEO succession and audit fees: evidence from China," Managerial Auditing Journal, Emerald Group Publishing Limited, vol. 36(3), pages 485-509, June.
    3. Hussein A. Abdou & Nouran N. Ellelly & Ahmed A. Elamer & Khaled Hussainey & Hassan Yazdifar, 2021. "Corporate governance and earnings management nexus: Evidence from the UK and Egypt using neural networks," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 6281-6311, October.
    4. Gull, Ammar Ali & Nekhili, Mehdi & Nagati, Haithem & Chtioui, Tawhid, 2018. "Beyond gender diversity: How specific attributes of female directors affect earnings management," The British Accounting Review, Elsevier, vol. 50(3), pages 255-274.
    5. Chizoba Mary Nwoye & Alphonsus Sunday Anichebe & Ifeanyi Francis Osegbue, 2021. "Effect of Audit Quality on Earnings Management in Insurance Companies in Nigeria," Athens Journal of Business & Economics, Athens Institute for Education and Research (ATINER), vol. 7(2), pages 173-202, April.
    6. Kothari, S.P. & Leone, Andrew J. & Wasley, Charles E., 2005. "Performance matched discretionary accrual measures," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 163-197, February.
    7. repec:hal:journl:hal-02312045 is not listed on IDEAS
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