Effects of the board of directors and audit committee on earnings management: Evidence from america during the current financial crisis

This study investigates the role of firms’ internal governance structures in constraining earnings management during the current financial crisis in the USA. Based on the data collected from the annual reports and the proxy statements of 68 US listed firms for the 2008 financial year, we found that the size and the frequency of meetings of the audit committee are not related to a reduction in the level of discretionary accruals. However, the independence of audit committees’ members found to be significantly related to a lower level of earnings management practices. Moreover, our findings disclosed a positive relationship between earnings management and board's independence. Nevertheless, our results confirmed that earnings management practices increase in the presence of duality roles of CEO/Chairman