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Pages:
11 pages/≈3025 words
Sources:
27 Sources
Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Research Paper
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 69.5
Topic:

The Earnings' Management Of A Firm: Dependent & Independent Variables (Research Paper Sample)

Instructions:

Write a research paper about the Earnings' Management of a firm clearly showing your measurable dependent variables and independent variables

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Content:


How the Household Ownership Controls the Association between the Financial Knowledge of the Audit Committee and the Earnings’ Management
Name
Institutional Affiliation
How the Household Ownership Controls the Association between the Financial Knowledge of the Audit Committee and the Earnings’ Management
Abstract
The current study offers an empirical evidence on the way the household’s ownership controls the association that exists between the financial knowledge of the audit committee and the earnings’ management based on a sample of 44 manufacturing companies that are registered with the Amman Stock Exchange (ASE) from 2012 to 2016. From the results of the study, there is a negative relationship between the financial knowledge of the audit committee and the earnings’ management. The results also show that a financial professional on the committee of audit plays an important duty of alleviating the earnings management. In addition, the study shows a positive relationship influence of the financial knowledge of the audit committee and the household ownership regulation on the earnings management when the financial professional of the audit committee works together with the household ownership. This relationship suggests that the rise in the number of the members of the audit committee with financial knowledge to curb earnings management, is unlikely to become significant if the organizations are in the control of the family. The findings have implications on the decision makers in Jordan because they emphasize on how to enhance sound company governance principles and try to alleviate the companies’ earnings management in Jordan.
Keywords: financial knowledge, Earnings management, Jordan, Audit committee, Family Ownership.
Introduction
The audit committee is among the key components in the company’s governance structure that helps to monitor and control the management (Arun, Almahrog, & Aribi, 2015). Experts consider the audit committee as the board of managements’ sub-committee that enables the official communication between the external auditor, the internal monitoring system, and the board. In addition, the experts consider the audit committee as the most essential sub-committee of any firm's management board. According to Ugrin, Odom, and Ott (2014), the audit committee guards the business's financial integrity and can enhance the financial reporting quality through reviews of the financial reports as they represent the board (Azeez, 2015).
The regulators have become interested to know the efficiency of the audit committees in monitoring the financial reporting of companies while responding to the key accounting scandals in America. According to Chen and Komal (2018), among the important developments meant to enhance the efficiency of the quality of audit committees concentrates on the audit committee members’ financial knowledge, with several studies declaring that the audit committee financial expertise (ACFE) is among the essential factors in audit committee’s efficiency. Chen and Komal asserts that, in 1999, there was a recommendation from the BRC that all the audit committee members ought to be financially knowledgeable with an accounting or associated knowledge of financial management. In addition, the Sarbanes-Oxley Act (2002) requires that the audit committee should have a member who is a professional in finance. Furthermore, earlier research works assert that the audit committee members’ financial knowledge plays a critical part in limiting the earnings’ management practices. According to Zalata et al. (2018), many countries now require some audit committee members to possess the financial knowledge.
Earlier research works show that the styles of ownership differ considerably across the nations especially the Asian countries with many publicly traded companies concentrating and mainly regulated a few people and relatives (Holderness, 2017). According to Leung, Richardson, and Jaggi (2014), it is evident that agency problems among the shareholders who are both majority and minority may dominate the companies that families control, hence, have a great motivation to steal the firms’ properties as they seek individual interests by sacrificing the minority investors.
Consequently, involving the companies’ governance instruments such as the audit committee financial expertise (ACFE) to offer the optimum monitoring is required such that to reduce the agency problems arising in the companies families control and lessen the EM practices in order to safeguard the wealth of the minority stockholders from being stolen.
The current study’s findings will add value to the prevailing works, since, several Arab businesses are those that the families own and control. Therefore, various nations that have exclusive characteristics of the ownership concentration, legal environment, and household dealings can use the results of this study (Martin, Campbell, & Gomez-Mejia 2016). Additionally, the current research adds to the literature by offering the understanding and new insights to examine the association between the audit committee financial expertise (ACFE) and EM that the families’ ownership control (FOC) influences in the context of Jordan.
The current study is organized in numerous sections as follows: literature review and hypothesis development on ACFE, FOC, and EM. Then, follows the methodology and sample data. Lastly, a summary and discussion of the results and discussion, and conclusions.
Literature Review and Hypothesis Development
Effect of FOC on the Association among the ACFE and EM
According to Lin et al. (2015), the audit committee's major duty is overseeing the companies’ procedures of auditing and financial reporting and, therefore, the members ought to have adequate know-how in order to comprehend the matters that the audit committees discuss or investigate. Numerous research works have found positive association among the efficiency of the audit committees and the financial knowledge of the members especially their abilities to make sure that there is a good quality procedure of financial reporting and complying with the associated guidelines. Earlier studies have offered sufficient proof of the significance of the audit committee financial expertise in limiting the EM practices. According to Gaynor, Kelton, Mercer, and Yohn (2016), the financial knowledge of the audit committees improves the probability to detect the material misstatements, which the audit committee gets informed about and is corrections done in time. Abbott, Daugherty, Parker, and Peters (2016) assert that the number of the members of the audit committee who have the accounting knowledge is positively related to the financial reporting quality of enhancing the financial rep...

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