Non-Executive Chairman, Audit Quality and Earnings Management

Abstract

The purpose of this paper is twofold, first, it examines the association of non-executive chairman and the quality of financial earnings and second, it examines the role of audit quality and non-executive chairman in earnings quality. This paper uses the modified jones model and the performance adjusted modified Jones model considering two cash flow methods of total accrual and perform regression analysis on the energy sector firms from the year 2010-2012. The study result does not find any significant association of earnings management and non-executive director and audit quality in the Australian context. This finding raises concerns regarding the effectiveness of such a corporate governance mechanism to maximize monitoring over the operation of the firm.