Abstract:
The study objects for investigating the possibility of activating both audit committee and board of directors for restricting the practices of earnings management phenomenon. To achieve this objective, a questionnaire had been developed and self-administered for a selected sample consists of 123 auditors working in Jordan based on the simple random sampling method. The study first hypothesis is that audit committee can be activated in a form to restrict earnings management practices; the second hypothesis takes that boards of directors can be activated in a form that restricts earnings management practices. The third hypothesis states that activating both of audit committees and boards of directors together will restrict the practices of earnings management. One sample t-test, in addition to descriptive statistics had been used in data analysis and hypotheses testing. The finding of the present study show that audit committee, boards of directors, and both of audit committee and board of directors together can be activated to restrict earnings management practices
Machine summary:
Ibrahim Obeidat 1,2 Department of Accounting , Jadara University, Irbid, Jordan The study objects for investigating the possibility of activating both audit committee and board of directors for restricting the practices of earnings management phenomenon.
Keywords: Corporate governance, Board of directors, Audit committee, Earnings management, Financial reporting INTRODUCTION Since the advent of the current century, the term of corporate governance acquired the attention of different interested groups of people such as academics, accountants, auditors, investors, and creditors.
com aspects of this term, specifically, boards of directors and audit committees as it is assumed that activating these two elements will enhance financial reporting issues and leads to the restriction of the different practices of earnings management phenomenon.
Third, the study also adds more to the literature of corporate governance, board of directors, audit committee, and the term of earnings management, in addition to the relations available among these terms.
The authors of the study believe that the practices of earnings management phenomenon can be restricted by through activating the rules of corporate governance, especially those rules of board of directors and audit committees, because of the authorities and tasks assigned to these two bodies.
An important study had been carried out by Peasnell, Pope, and Young (2005), over UK firms to examine whether the incidence of earnings management depends on outside members of board of directors and audit committee.
3. Earnings management phenomenon can be more restricted through activating both of audit committee and board of directors, based on the corporate governance rules.