FINANCIAL CONDITION MODERATED THE EFFECTIVENESS OF AUDIT COMMITTEE TO REDUCE EARNINGS MANAGEMENT

Prayogo, Michella Maria Virgine and Yie Ke, Feliana and Sutanto, Aurelia Carina Christanti (2014) FINANCIAL CONDITION MODERATED THE EFFECTIVENESS OF AUDIT COMMITTEE TO REDUCE EARNINGS MANAGEMENT. In: International Symposium on Management 11th: Social Responsibility as competitive advantage in green business, 15-16 Maret 2014, Batu.

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Abstract

Some cases of financial fraud invite inquiries about the effectiveness of corporate governance mechanism in financial distress companies. This study empirically examines whether the financial distress moderate the impact of corporate governance mechanism to earnings management. The sample of this study is manufacturing companies listed at Indonesia Stock Exchange for period 2010 -2012. Discretionary accruals are used as a proxy for earnings management, while financially distressed and non-distressed firms are identified based on Altman Z-score test. Corporate governance mechanism is measured by four characteristics of the audit committee, i.e. size (total number of audit committee members), independence (audit committee composition), activity (frequency of audit committee meeting), and expertise (the number of audit committee have finance or accounting background). This study finds that (1) financial distress does not moderate the impact of total members of audit committee to earnings management; (2) financial distress does not moderate the impact of frequency of audit committee meeting to earnings management; (3) financial distress does not moderate the impact of audit committee composition to earnings management; (4) financial distress moderates the impact of audit committee finance/accounting knowledge to earnings management. These results suggest that the effectiveness corporate governance is low, and finance/accounting literacy of audit committee should be alert.

Item Type: Conference or Workshop Item (Paper)
Uncontrolled Keywords: corporate governance, earnings management, financial distress
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Divisions: Faculty of Business and Economic > Department of Accounting
Depositing User: Yie Ke Feliana 3193
Date Deposited: 23 Apr 2015 04:15
Last Modified: 23 Apr 2015 04:15
URI: http://repository.ubaya.ac.id/id/eprint/24057

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