Investigating the effect of audit committee characteristics on earnings management through accruals

Nowadays, regarding the increase and development of public companies, monitoring the operations and process of establishing the economic entities is very significant. The audit committee is one of the mechanisms of corporate governance and it is expected that this mechanism proves influential in protecting the interests of different groups using accounting services. Using the agency theoretical framework, the study explores the impacts of audit committee characteristics on financial reporting quality, through measuring the discretionary accruals. These characteristics include financial expertise, independence, experience, and audit committee size. The data were explored, based on a sample including 310 firm-year observations in Tehran Stock Exchange, during the years 2011 to 2014. The results showed a significant, negative relationship between the audit committee's financial expertise and accrual-based earnings management. In contrary to the researcher’s expectation, there has been a significant, positive relationship between the audit committee financial experience and the accrual-based earnings management. Also, there has been no significant relationship between the audit committee independence and size to the accrual-based earnings management.