RETHINKING AUDIT COMMITTEE COMPETENCE: ACCREDITATION, EXPERIENCE, AND DIGITAL SKILLS IN CONSTRAINING REAL EARNINGS MANAGEMENT

Abstract

This study examines how audit committee (AC) competencies influence real earnings management (REM) in Malaysian publicly listed companies (PLCs) during a period of significant governance reform (2017 to 2019). Using secondary data from annual reports and financial databases, the analysis revealed that different forms of AC expertise exert divergent effects on financial reporting oversight. Financial expertise associated with Malaysian Institute of Accountants (MIA) membership (ACMIA) consistently constrains REM, highlighting the importance of statutory accreditation, professional ethics, and jurisdiction-specific regulatory knowledge. In contrast, financial expertise without MIA membership (ACFIN) is positively associated with REM, suggesting that technical expertise alone may be insufficient to ensure effective governance when it is not institutionally embedded within the local regulatory environment. Digital competence within the AC (ACDIGI) exhibits a weaker but significant negative relationship with REM, indicating its emerging importance in increasingly digitalised reporting systems. By distinguishing between MIA-accredited and non-MIA financial expertise and introducing digital competence as an additional dimension of AC capability, this study extends agency theory, resource dependence theory, and Masli et al.’s (2018) multidimensional board effectiveness framework. The findings highlight the importance of aligning professional expertise with institutional context and technological capability to strengthen financial oversight and enhance reporting integrity in emerging markets.