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Audit committees and earnings quality
Author(s) -
Baxter Peter,
Cotter Julie
Publication year - 2009
Publication title -
accounting and finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.645
H-Index - 49
eISSN - 1467-629X
pISSN - 0810-5391
DOI - 10.1111/j.1467-629x.2008.00290.x
Subject(s) - audit committee , accrual , accounting , audit , earnings , earnings quality , business , audit evidence , quality audit , earnings management , chief audit executive , sample (material) , quality (philosophy) , joint audit , actuarial science , internal audit , philosophy , chemistry , chromatography , epistemology
This research investigates whether audit committees are associated with improved earnings quality for a sample of Australian listed companies prior to the introduction of mandatory audit committee requirements in 2003. Two measures of earnings quality are used based on models first developed by Jones (1991) and Dechow and Dichev (2002). Our results indicate that formation of an audit committee reduces intentional earnings management but not accrual estimation errors. We also find differences in the associations between audit committee accounting expertise and the two earnings quality measures. Other audit committee characteristics examined are not significantly related to either earnings quality measure.