Abd Azizi, Nor Haiza and Mohd Iskandar, Takiah and Mohd Saleh, Norman (2006). Pengurusan perolehan: Peranan kualiti audit dan urus tadbir korporat. International Journal of Management Studies (IJMS), 13. pp. 163-188. ISSN 0127-8983
This study has investigated certain corporate governance characteristics, which include independence of board of directors, accounting skill and knowledge of audit committee, and managerial equity ownership, and the relationships between theses characteristics and earnings management. In addition, this study has also examined the role of audit quality as an independent variable as well as a moderating variable. The sample consists of 812 and 868 companies that have been listed on both the First and Second Boards of Bursa Malaysia for the years 2001 and 2002, respectively. In this study, the dependent variable is the discretionary accruals. The agency theory is used to explain the relationships between variables. Results show that independence of board of directors has a significant relationship with discretionary accruals. It was also observed that there was a significant negative relationship between accounting skill and knowledge of audit committee, and discretionary accruals.These findings indicate that the board of directors’ independence and audit committees’ accounting skill and knowledge are important factors in curtailing earnings management practices. The results of a regression analysis also indicate that audit quality has a significant negative relationship with discretionary accruals. This finding is consistent with the theory which states that high quality audit reduces agency costs resulting from the separation between ownership and company management. Overall, results of this study provide an explanation for the importance of both internal and external mechanisms of corporate governance in strengthening the monitoring of the company.
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