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

Authors: Doddy Setiawan; Lian Kee Phua; Hong Kok Chee; Irwan Trinugroho

Addresses: Faculty of Economics and Business, Universitas Sebelas Maret, Jl Ir Sutami No. 36 Surakarta, 57126, Indonesia ' School of Management, Universiti Sains Malaysia, 11800 USM Penang, Malaysia ' School of Management, Universiti Sains Malaysia, 11800 USM Penang, Malaysia ' Faculty of Economics and Business, Universitas Sebelas Maret, Jl Ir Sutami No. 36 Surakarta, 57126, Indonesia

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.

Keywords: audit committee; earnings management; financial expertise; gender; number of meetings; Indonesia.

DOI: 10.1504/AAJFA.2020.110488

Afro-Asian Journal of Finance and Accounting, 2020 Vol.10 No.4, pp.447 - 463

Accepted: 24 Apr 2018
Published online: 12 May 2020 *

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