Audit committees, External Auditors and Earnings management: Evidence from Chinese non-state-owned enterprises.

This paper investigates the effect of the audit committee, external auditors on earnings management in Chinese non-state-owned enterprises to enrich the literature on the influencing factors of earnings management in a different context. Besides, this paper analyses the correlation between the characteristics of the audit committee and earnings management with the aims to provide a theoretical basis for the improvement of the audit committee system. This paper also is intended to offer different perspectives for enterprises to use independent auditors by analysing earnings management from the standpoint of external auditors. The discretionary accruals present the level of earnings management in the paper according to the modified Jones Model (1995). Based on a sample of 398 Chinese non-state-owned enterprises from the year 2015 to 2018, the results from the random effect model presents five characteristics of the audit committee, and external auditors have a different effect on the earnings management, respectively. The size of the audit committee is negatively related to the level of earnings management. Similarly, the audit quality referred to by the size of the audit firm has a significant negative association with earnings management. However, there is no evidence supporting that both the audit committee independence and the audit committee professionalism have a significant relationship with the earnings management. Also, although the audit tenure affects negatively discretionary accruals, this influence is not significant