Audit Committees and Quarterly Earnings Management
Regulators have frequently expressed concerns about corporate earnings management. Audit committees are expected to monitor managers’ financial reporting, including attempts to manipulate earnings numbers. The extant literature has focused on managers’ incentives to manipulate annual earnings number...
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Published in | International journal of auditing Vol. 9; no. 3; pp. 201 - 219 |
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Main Authors | , |
Format | Journal Article |
Language | English |
Published |
Oxford, UK and Malden, USA
Blackwell Publishing Ltd
01.11.2005
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Subjects | |
Online Access | Get full text |
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Summary: | Regulators have frequently expressed concerns about corporate earnings management. Audit committees are expected to monitor managers’ financial reporting, including attempts to manipulate earnings numbers. The extant literature has focused on managers’ incentives to manipulate annual earnings numbers. However, managers also have incentives to manage quarterly earnings, due to, for example, pressures to meet quarterly analyst forecasts. We test the association between audit committee characteristics and measures of quarterly earnings management. Using a sample of 896 firm‐year observations for the years 1996–2000, we report three findings. First, quarterly earnings management is lower for firms whose audit committee directors have greater governance expertise. Second, the extent of stock ownership by audit committee directors is positively associated with quarterly earnings management. Third, the average tenure of audit committee directors is negatively associated with quarterly earnings management. |
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Bibliography: | istex:0A0A41E9AEE7B9527A575C415E5781A5F33940EF ark:/67375/WNG-68BC4123-V ArticleID:IJA278 ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 |
ISSN: | 1090-6738 1099-1123 |
DOI: | 10.1111/j.1099-1123.2005.00278.x |