Conceptualizing The Effect of Political Instability Towards Audit Committee Effectiveness and Earnings Management
This paper aims to conceptualize the relationship between audit committee (AC) characteristics and earnings management (EM). It hypothesizes that political instability moderates the relationship between the two variables. The paper bridges the knowledge gap by proposing a conceptual framework re...
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| Main Authors: | , |
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| Format: | Article |
| Language: | en |
| Published: |
Euromid Academy of Business and Technology (EMABT)
2024
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| Summary: | This paper aims to conceptualize the relationship between audit committee (AC) characteristics
and earnings management (EM). It hypothesizes that political instability moderates the relationship between
the two variables. The paper bridges the knowledge gap by proposing a conceptual framework related to
AC characteristics, EM, and political instability. This article reviews recent literature on CG and EM to
understand how AC characteristics may mitigate EM practices. Moreover, it illustrates the effect of political
instability on managers’ engagement in EM. Evidence from prior studies suggests that AC is an important
part of the firm’s structure and responsible for monitoring financial information quality in financial reports.
It is argued that an effective AC can reduce EM levels. During periods of intense political instability,
managers are motivated to engage in high levels of EM to enhance their companies’ financial performance.
This paper argues that a more effective AC will deter the opportunistic behaviors of managers to engage in
EM. |
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