The Watchdogs of Financial Reporting: Audit Committee Quality, Auditor Size, and Earnings Management

Nazila Alfiyasahra; Aulifi Ermania Challen

doi:10.58777/efi.v1i1.504

Authors

Nazila Alfiyasahra Faculty of Economics and Business, YARSI University, Jakarta
Aulifi Ermania Challen Faculty of Economics and Business, YARSI University, Jakarta

DOI:

https://doi.org/10.58777/efi.v1i1.504

Keywords:

Audit Committee Size, Number of Audit Committee Meetings, Independent Audit Committee, Audit Committee Expertise, Size of Public Accounting Firm, Earnings Management

Abstract

This study investigates the impact of audit committee quality and the size of public accounting firms on earnings management. The audit committee's characteristics are assessed through proxies, including the size of the audit committee, the frequency of its meetings, the independence of its members, and their relevant expertise. The research utilizes secondary data from companies classified within the basic and chemical manufacturing industries that are listed on the Indonesia Stock Exchange (IDX). A purposive sampling method yielded a sample of 16 firms spanning the period from 2015 to 2017. The analytical approach employed was multiple regression. The findings suggest that an independent audit committee has a positive influence on earnings management. Conversely, factors such as the size of the audit committee, the number of meetings held, the expertise of committee members, and the size of the public accounting firm do not significantly affect earnings management. The managerial implications of this study recommend that companies should prioritize the independence of their audit committees, recognizing it as an effective oversight mechanism for mitigating earnings management practices.

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