The Impact of Internal Monitoring Mechanism and External Audit on Earnings Quality Evidence from Indonesia
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 12
Abstract
The objective of this study is to examine the combined effect of external audit and internal monitoring mechanism corporate governance on earnings quality. The paper uses panel data with fixed-effects model to examine the effect of external audit, internal monitoring mechanisms and the interaction between these two monitoring mechanisms on earnings quality. A sample of 216 listed Indonesian firms (non-financial) covering the period: 2013 to 2016 was used for the study. The findings of the study reveal that both board size and audit committee independence have positive relationships with earnings quality which is in contrary to the result of most previous studies. In essence, the result of this study indicates that both internal monitoring mechanisms (audit committee independence, board size and Audit committee meeting) and external audit have a joint effect to reduce earnings management. Thus, this show that the internal monitoring mechanism and external audit would jointly reduce earnings management and thereby improves earnings quality. Furthermore, the results of this study provide a beneficial information to investors in Indonesia to evaluate the influence external audit and internal monitoring mechanisms on earnings quality.
Authors and Affiliations
Lidya Primta Surbakti, Hasnah Binti Shaari
Keywords
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- EP ID EP422295
- DOI 10.9790/487X-2012026269.
- Views 47
- Downloads 0
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