FINANCIAL CONDITION MODERATED THE EFFECTIVENESS OF AUDIT COMMITTEETOREDUCE EARNINGS MANAGEMENT

Abstract: Some  cases  of  financial  fraud  invite  inquiries  about  the  effectiveness  of  corporate governance  mechanism  in  financial  distress  companies. This  study  empirically examines  whether  the financial  distress moderate  the impact of corporate  governancemechanism to earnings  management.  The  sample  of  this study is manufacturing companies  listed  at  Indonesia  Stock  Exchange  for  period  2010  -2012. Discretionary accruals are used as a proxy for earnings management, while financially distressed and non-distressed firms are identified based on Altman Z-score test. Corporate governancemechanism is  measured  by four  characteristics  of  the  audit  committee, i.e. size  (total number  of  audit  committee  members),  independence  (audit  committee  composition), activity(frequency  of  audit  committee  meeting),  and  expertise (the  number  of  audit committee  have  finance  or accounting  background).This  study  finds that  (1) financial distress does not moderate the impact of total members of audit committee to earnings management; (2) financial distress does not moderate the impact of frequency of audit committee  meeting to earnings  management;  (3)  financial  distress  does  not  moderate the  impact  of  audit  committee  composition to earnings  management;  (4)financial distress  moderates the  impact  of  audit  committee finance/accounting  knowledge toearnings management. These results suggestthat the effectiveness corporate governance is low, and finance/accounting literacy of audit committee should be alert.

Keywords: corporate  governance,  audit  commitee,  earnings  management,  financial distress

Author: Michella Maria Virgine Prayogo,Yie Ke Feliana, Aurelia Carina Christanti Sutanto

Journal Code: jpmanajemengg130090

Artikel Terkait :

Jp Manajemen gg 2013

• THE EFFECT OF BRAND AWARENESS, BRAND ASSOCIATION, AND PERCEIVED QUALITY ON THE DECISION OF CHOOSING STATE UNIVERSITY IN SURABAYA
• THE FINANCIAL BEHAVIOR OF INVESTORS USING DISCRIMINANT ANALYSIS APPROACH
• SPIRITUALITY IN WORKPLACE, INDIVIDUAL SPIRITUALITY AND WORK BEHAVIOUR: THE STUDY OF HIGHER EDUCATION IN INDONESIA
• THE IMPACT OF RECRUITMENT SYSTEM AND CAREER DEVELOPMENT ON THE ENHANCING OF EFFECTIVENESS IN WORKING THROUGH COMPENSATION AS INTERVENING VARIABLE AT NIAGARA HOTEL PARAPAT
• The Influence of Financial Performance and Institutional Ownership on Disclosure of Corporate Social Responsibility: Empirical Study of The Companies Listed on Indonesia Stock Exchange in 2012
• CAN THE GOOD CORPORATE ETHICS STATEMENTS AND CORPORATE SOCIAL RESPONSIBILITY CREATEPOSITIVE CONSUMER RESPONSESON THE COMPANY AND ITS PRODUCTS? AN EMPIRICAL FINDING IN THE CASE OF CONTROVERSIAL COMPANY
• The Effect of Voluntary Disclosure and Earnings Quality on Cost of Equity
• FORMATION OF CONSUMER ATTITUDE THROUGH CAUSED RELATED MARKETING ACTIVITY IN HEDONIC AND LOW INVOLVEMENT PRODUCT
• EXAMINING THE INFLUENCE OF ORGANIZATIONAL CLIMATE AND ATTITUDE TOWARD KNOWLEDGE SHARING ON KNOWLEDGE SHARING INTENTION
• LIFESTYLE ON INTENTION THROUGH THE MEDIATION OF PERCEIVED USEFULNESS AND PERCEIVED EASE OF USE
• BRAND EQUITY TOWARDS REPURCHASING INTENTION OF MOBILE PHONES THROUGH CONSUMER VALUE
• THE ROLE OF EVENT ATTENDEES’ KNOWLEDGE, ENTHUSIASMS, AND ACTIVENESS ON COMMUNITY INVOLVEMENT
• RELATIONSHIP BETWEEN MANAGERS’ POLITICAL BEHAVIOR IN PERFORMANCE APPRAISAL SYSTEMS AND PERSONAL OUTCOMES
• SHOPPERS’ LOYALTY IN PASAR DUKUH MENANGGAL SURABAYA
• The Role of Microinsurance as a Social Protection
• ANALYSIS RELATIONSHIP AMONG VISIONS, OLFACTIONS, TASTE, AND HAPTICS SENSE WITH SENSORY BRANDING FOR POND’S PRODUCT IN TONDANO
• THE INFLUENCE OF CUSTOMER PURCHASE DECISION ON CUSTOMER SATISFACTION AND IT’S IMPACT TO CUSTOMER LOYALTY
• THE IMPACT OF PERCEIVED VALUE ON CUSTOMER SATISFACTION AND REPURCHASE INTENTION OF BLACKBERRY USERS IN MANADO
• THE INFLUENCE OF BRAND RECOGNITION, BRAND RECALL, AND TOP OF MIND TO CONSUMER BUYING DECISION
• PERCEIVED USEFULNESS, PERCEIVED EASE OF USE, PERCEIVED RISK IMPACT TO LECTURERS’ INTERNET BANKING ADOPTION
• THE INFLUENCE OF BRAND IMAGE, BRAND PERSONALITY AND BRAND AWARENESS ON CONSUMER PURCHASE INTENTION OF APPLE SMARTPHONE
• THE ANALYSIS OF BANK PERFORMANCE IN PT. BANK NEGARA INDONESIA, TBK AND PT. BANK RAKYAT INDONESIA,TBK BASED ON FINANCIAL RATIO
• THE DETERMINANTS OF EMPLOYEE PRODUCTIVITY IN REGIONAL OFFICE OF BANK NEGARA INDONESIA MANADO
• THE EFFECT OF TRADITIONAL AND ELECTRONIC WORD-OF-MOUTH ON PURCHASE DECISION