دانلود رایگان مقاله انگلیسی کمیته حسابرسی و مدیریت سود - شواهد از سیستم هیئت مدیره دو جانبه آلمان - اشپرینگر 2017

Abstract

This study investigates whether audit committees of German firms and their characteristics are related to earnings management. This issue is of particular interest, as it reveals the effectiveness of voluntarily established audit committees in a two-tier board system. In contrast, most prior research focuses on the characteristics of mandatory audit committees in one-tier board systems. We use a sample from German listed firms between 2005 and 2009, and accrual-based earnings management serves as a proxy for audit committee effectiveness. The results suggest that the existence of an audit committee is related to a lower degree of earnings management. Using a differences-in-differences approach, we also provide evidence that the level of earnings management decreases after the formation of an audit committee. Moreover, the results show that the participation of financial experts in audit committees and the increase in audit committee meetings are associated with less earnings management, i. e. these characteristics seem to enhance the effectiveness of audit committees. With respect to meeting frequency, 4–5 meetings per year seem to represent an effective number of meetings in order to reduce the level of earnings management.

7 Conclusion

The study provides evidence on the relationship between audit committees and earnings management in the German two-tier board system, with its voluntary audit committee establishment. We investigate whether (1) the existence and formation of an audit committee is associated to less earnings management and (2) specific audit committee characteristics enhance committee effectiveness. Based on a sample of 1462 firm-year observations from 401 firms listed on the regulated market of the Frankfurt stock exchange (CDAX), we find evidence that earnings management is lower if firms have an audit committee. Furthermore, we find that the level of earnings management decreases in the first year after audit committee formation, compared to the pre-formation year.

Based on these results, there is evidence that audit committee effectiveness can be enhanced further if the committee includes financial experts and if the committee meets regularly. Financial expertise is important to independently assessing financial issues presented to the audit committee. The results show that earnings management is lower when at least one audit committee member has financial expertise. Audit committee meetings represent the committee’s activity. A sufficient amount of meetings indicates that the effort devoted to monitoring management is substantial. The results indicate that 4–5 meetings per year seem to represent an effective number of meetings, in order to reduce the level of earnings management. We further analyzed the impact of audit committee size on earnings management and expected that larger committees are better able to fulfill their duties and to cope with the complexity of corporate structure, but that these positive effects decline when committees become too large. However, we do not find evidence that audit committee size is related to earnings management, which implies that size per se is less important than the expertise of its members.