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Audit committees and earnings quality

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  • Peter Baxter
  • Julie Cotter

Abstract

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.

Suggested Citation

  • Peter Baxter & Julie Cotter, 2009. "Audit committees and earnings quality," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(2), pages 267-290, June.
    • Handle: RePEc:bla:acctfi:v:49:y:2009:i:2:p:267-290
    DOI: 10.1111/j.1467-629X.2008.00290.x
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    References listed on IDEAS

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