Title: Audit committee features and earnings management: further evidence from Singapore

Authors: J-L.W. Mitchell Van Der Zahn, Greg Tower

Addresses: Singapore Management University, 05–11, 469 Bukit Timah Road, 259756, Singapore. ' School of Accounting, Curtin University of Technology, GPO Box U1987, Perth, Western Australia 6845, Australia

Abstract: In this paper, we investigate the link between audit committees and earnings management providing a more comprehensive simultaneous analysis of the influence of audit committee features using a sample of 485 firm-years from Singapore|s publicly traded firms during the 2000–2001 calendar period. Empirical findings indicate firms with a higher proportion of independent audit committee members are more effective at constraining earnings management. Firms with audit committees that are more diligent and/or lack the presence of independent directors serving simultaneously on a substantial number of boards and committees are more effective at constraining earnings management. These findings are robust to alternative income-incentives facing corporate management. Overall, our findings have implications for stakeholders, regulators, and corporate governance. For example, our findings infer policymakers may need to focus on other audit committee characteristics to strengthen the committee|s ability to constrain earnings management rather than continue the present fixation with independence.

Keywords: earnings management; audit committees; income-reporting incentives; Singapore; corporate governance.

DOI: 10.1504/IJBGE.2004.005257

International Journal of Business Governance and Ethics, 2004 Vol.1 No.2/3, pp.233 - 258

Published online: 16 Sep 2004 *

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