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Evidence shows negative relations between both audit committee independence and abnormal accruals and between board independence and abnormal accruals. Decreases in independence correspond to substantial increases in abnormal accruals, with the strongest effects when boards or audit committees consist of a minority of outside directors, indicating more effective monitoring when structures are independent of the CEO.",{"@graph":69,"@context":122},[70,84,105],{"@type":71,"itemListElement":72},"BreadcrumbList",[73,77,79,82],{"item":74,"name":75,"@type":76,"position":8},"https://docshare.wps.com","Home","ListItem",{"item":78,"name":9,"@type":76,"position":14},"https://docshare.wps.com/document/",{"item":80,"name":40,"@type":76,"position":81},"https://docshare.wps.com/document/research-report/",3,{"item":83,"name":65,"@type":76,"position":19},"https://docshare.wps.com/document/audit-committee-board-of-director-characteristics-and-earnings-management/628489/",{"url":83,"name":65,"@type":85,"image":86,"author":91,"headline":65,"publisher":94,"fileFormat":97,"inLanguage":63,"description":67,"dateModified":98,"datePublished":99,"encodingFormat":97,"isAccessibleForFree":100,"interactionStatistic":101},"DigitalDocument",{"url":87,"@type":88,"width":89,"height":90},"https://docshare.wps.com/thumbnails/audit-committee-board-of-director-characteristics-and-earnings-management/628489.png","ImageObject",300,407,{"name":92,"@type":93},"Emma Wilson","Person",{"url":74,"name":95,"@type":96},"DocShare","Organization","application/pdf","2026-10-29","2026-10-21",true,{"@type":102,"interactionType":103,"userInteractionCount":8},"InteractionCounter",{"@type":104},"ViewAction",{"@type":106,"mainEntity":107},"FAQPage",[108,114,118],{"name":109,"@type":110,"acceptedAnswer":111},"What relationship does the study find between audit committee independence and earnings management?","Question",{"text":112,"@type":113},"The study finds a negative relation between audit committee independence and abnormal accruals, indicating less earnings management when audit committees are more independent.","Answer",{"name":115,"@type":110,"acceptedAnswer":116},"How does board independence relate to abnormal accruals?",{"text":117,"@type":113},"A negative association is found between board independence and abnormal accruals, and the most pronounced effects occur when the board or audit committee includes only a minority of outside directors.",{"name":119,"@type":110,"acceptedAnswer":120},"Do changes in independence correspond to changes in earnings management?",{"text":121,"@type":113},"Yes. Firms moving from majority-independent to minority-independent boards and/or audit committees exhibit significantly larger increases in abnormal accruals compared with counterparts.","https://schema.org",{"og:url":83,"og:type":124,"og:title":65,"og:site_name":95,"og:description":67},"article",{"robots":126,"canonical":83},"index,follow",{"doc_id":128,"site_id":62},628489,1792616770,{"code":4,"msg":5,"data":131},{"doc_id":128,"user_id":132,"nickname":92,"user_avatar":133,"doc_module":4,"category_id":39,"category_name":40,"doc_title":65,"doc_description":67,"doc_content":134,"file_id":135,"file_url":136,"file_type":137,"file_size":138,"view_count":8,"is_deleted":4,"is_public":8,"is_downloadable":8,"audit_status":8,"page_count":139,"language":140,"language_code":63,"site_id":62,"html_lang":63,"table_of_contents":141,"faqs":142,"seo_title":143,"seo_description":67,"update_tm":129,"read_time":144},3848291630094,"https://eur-avatar.wpscdn.com/davatar_085a072bc5b1113ac321206ff7593b45","Journal of Accounting and Economics 33 (2002) 375–400  \nAudit committee, board of director characteristics, and earnings management $  \nApril Klein*  \nStern School of Business, New York University, New York, NY 10012-1118, USA Received 20 October 2000; received in revised form 2 February 2002  \nAbstract  \nThis study examines whether audit committee and board characteristics are related to earnings management by the firm. A negative relation is found between audit committee independence and abnormal accruals. A negative relation is also found between board independence and abnormal accruals. Reductions in board or audit committee independence are accompanied by large increases in abnormal accruals. The most pronounced effects occur when either the board or the audit committee is comprised of a minority of outside directors. These results suggest that boards structured to be more independent of the CEO are more effective in monitoring the corporate financial accounting process. r 2002 Elsevier Science B.V. All rights reserved.  \nJEL classification: K0; G3; M4  \nKeywords: Earnings management; Corporate governance; Audit committee; Board of directors  \n1. Introduction  \nIn December 1999, the NYSE and NASDAQ modified their requirements for audit committees. Under the new standards, firms must maintain audit committees with at least three directors, ‘‘all of whom have no relationship to the company that  \n$I would like to acknowledge the helpful comments of S.P. Kothari (the editor), an anonymous referee, Eli Bartov, James Doona, Lee-Seok Hwang, Jayanthi Krishnan, Carol Marquardt and the participants atthe Temple University and NYU workshops. The Ross Institute of the Stern School of Business provided financial support.  \n*Corresponding author. Tel.: +1-212-998-0014; fax: +1-212-995-4004 .  \nE-mail address: [aklein@stern.nyu.edu](aklein@stern.nyu.edu) (A. Klein) .  \n0165-4101/02/$ -see front matter r 2002 Elsevier Science B.V. All rights reserved.  \nPII: S 0 1 6 5-4101(0 2 )00059-9  \n376 A. Klein / Journal of Accounting and Economics 33 (2002) 375–400  \nmay interfere with the exercise of their independence from management and the company’’(NYSE Listing Guide, Section 303 .01(B)(2)(a)) . These new requirements respond to the SEC’s call for improving the effectiveness of corporate audit committees in overseeing the financial reporting process. One specific area of concern to the SEC is inappropriate ‘‘earnings management’’ by the firm defined as ‘‘the practice of distorting the true financial performance of the company’’.1 The common thread running through the SEC and stock exchange proposals is an implicit positive connection between earnings management and non-independent audit committees. Yet no study to date explicitly tests this assertion. The purpose of this paper is to undertake such a study.  \nUsing a sample of 692 publicly traded U. S. firm-years, I examine whether the magnitude of abnormal accruals (the proxy for earnings management) is related to audit committee independence. After controlling for other determinants of abnormal accruals and audit committee composition, I find the magnitude of abnormal accruals to be more pronounced for firms with audit committees comprised of less than a majority of independent directors. I also find a negative association between abnormal accruals and the percent of outside directors on the audit committee. However, and contrary to the SEC’s intent, no difference in abnormal accruals is found between firms with and without wholly independent committees.  \nGiven that the audit committee’s effectiveness is embedded within the larger corporate governess process, I also investigate whether abnormal accruals are related to other board characteristics. I find significantly negative associations between abnormal accruals and the percent of outside directors on the board, and for whether the board is comprised of less than a majority of outside directors. These results are harmonious to the audit committee findings ","cbCaieFYHqMfg13a","https://ap.wps.com/l/cbCaieFYHqMfg13a","pdf",193708,26,"English","# Abstract\n# Introduction\n## Audit committee independence and earnings management\n## Board independence and monitoring effectiveness\n## Changes in independence over time","[{\"question\":\"What relationship does the study find between audit committee independence and earnings management?\",\"answer\":\"The study finds a negative relation between audit committee independence and abnormal accruals, indicating less earnings management when audit committees are more independent.\"},{\"question\":\"How does board independence relate to abnormal accruals?\",\"answer\":\"A negative association is found between board independence and abnormal accruals, and the most pronounced effects occur when the board or audit committee includes only a minority of outside directors.\"},{\"question\":\"Do changes in independence correspond to changes in earnings management?\",\"answer\":\"Yes. Firms moving from majority-independent to minority-independent boards and/or audit committees exhibit significantly larger increases in abnormal accruals compared with counterparts.\"}]","Audit committee, board of director characteristics, and earnings management | PDF",66]