Effective audit committee, audit quality and earnings management: evidence from the Ghana Stock Exchange

Abstract

The purpose of this paper is to investigate the influence of audit committee effectiveness and audit quality (auditor size) on earnings management by firms listed on the Ghana Stock Exchange (GSE). The study uses 180 firm-year observations for the period 2013-2017 for firms listed on the Ghana Stock Exchange. Descriptive analysis was performed to provide the background statistics of the variables examined. This was followed by regression analysis, which forms the main data analysis. The results of multivariate regression analysis indicated that audit committee financial expertise, audit committee prior experience, audit committee size and audit quality have significant negative relationship with discretionary accruals (DACC) as a proxy for earnings management. On the other hand, no significant relationship was found between audit committee independence and audit committee meeting (ACMT) and the level of discretionary accruals. This paper is important because it offers useful information that is of great value to policy makers, academics and other stakeholders. This study is one of the few to measure the influence of audit committee effectiveness and audit quality (auditor size) on earnings management.