The Effect of Integration of Coroprate Governance Mechanisms and Audit Quality in Earning Management: An Empirical Analysis of Listed Banks in Iraqi Stock Exchange
Keywords:external audit, corporate governance, earnings management, banks, Iraq.
The aim of this study is to examine the effects of board of directors, audit committee and concentration ownership as corporate governance mechanisms on earning management. The study aims also to investigate the role of audit quality on the association between corporate governance and earning management of listed banks in Iraqi stock exchange for the year 2015. The number of meetings and directors are other factors to be examined. The size of audit committee members and the audit committee presence that are professionally certified are the factors to be considered in audit committee. In another word, the concentration of ownership included both managerial ownership, block shareholders and foreign ownership. The findings showed that external audit has effect on the fiveparameters considered under the effects of corporate governance on earning management. Therefore, the numbers of meetings, the audit committee knowledge, audit committee existence, managerial ownership and foreign ownership significantly have impact on earning management. Conversely, external audit has no impact on the association between block shareholder, size of the board of directors and earning management. In lieu of the studyâ€™s outcome, corporate governance proves to be a huge impact on reducing earnings management while the intervention of audit quality equally contributes to the reduction of earnings management practices.
 Ali Shah, S Z., Nousheen, S., & Tahir Khan, D. (2009). "Board Composition and Earnings Management an Empirical Evidence Form Pakistani Listed Companies". Middle Eastern Finance and Economics, 3: 28-38.
 Ali, S. M., Salleh, N. M., & Hassan, M. S. (2008). Ownership structure and earnings management in Malaysian listed companies: the size effect. Asian Journal of Business and Accounting, 1(2), 89-116.
 Al-taie, B. F. K., Flayyih, H. H., Talab, H. R., & Hussein, N. A. (2017). The Role of Tax Havens in the Tax Revenue Development and Its Reflection on the Public Revenues of the Developing Countries: An Empirical Study in Iraq (2004-2014). Mediterranean Journal of Social Sciences, 8(2), 289.
 Banderlipe, I. I., & Mc Reynald, S. (2009). The Impact of Selected Corporate Governance Variables in Mitigating Earnings Management in the Philippines. DLSU Business & Economics Review, 19(1).
 Beasley, M. S., & Salterio, S. E. (2001). The relationship between board characteristics and voluntary improvements in audit committee composition and experience. Contemporary Accounting Research, 18(4), 539-570.
 Bedard, J., Chtourou, S. M., & Courteau, L. (2004). The effect of audit committee expertise, independence, and activity on aggressive earnings management. Auditing: A Journal of Practice & Theory, 23(2), 13-35.
 Berle, A., & Means, G. (1932). Private property and the modern corporation. New York: Mac-millan.
 Chen, J. J., & Zhang, H. (2014). The impact of the corporate governance code on earnings managementâ€“Evidence from Chinese listed companies. European Financial Management, 20(3), 596-632.
 Chi, W., Lisic, L. L., & Pevzner, M. (2011). Is enhanced audit quality associated with greater real earnings management?. Accounting Horizons, 25(2), 315-335.
 Choi, J.H., Jeon, K.A., and Park, M.L (2004). The Role of Audit Committees in Decreasing Earnings management: Korean Evidence. International Journal of Accounting, Auditing and Performance Evaluation, Vol. 1, No, 1: pp. 37-60.
 DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of accounting and economics, 3(3), 183-199.
 Demsetz, H., & Lehn, K. (1985). The structure of corporate ownership: Causes and consequences. Journal of political economy, 93(6), 1155-1177.
 El Mir, A., & Seboui, S. (2006). Corporate governance and earnings management and the relationship between economic value added and created shareholder value. Journal of Asset Management, 7(3-4), 242-254.
 Fallatah, Y., & Dickins, D. (2012). Corporate governance and firm performance and value in Saudi Arabia. African Journal of Business Management, 6(36), 10025.
 Goncharov, I. (2005). Earnings management and its determinants: Closing gaps in empirical accounting research(Vol. 5). Peter Lang Pub Inc.
 Gor, Y., Karakus, R., & Tasar, I. (2017). Conservatism, corporate governance and audit quality: A study at Istanbul Stock Exchange. Theoretical & Applied Economics, 24.
 Gujarati, D. N. (2009). Basic econometrics. Tata McGraw-Hill Education.
 Hoitash, R., Hoitash, U., & Bedard, J. C. (2008). Internal control quality and audit pricing under the Sarbanes-
 Ibrahim, M.A., Flayyih, H.H. and Talab, HR. (2017). Excellence of Iraqi Accounting Authority structure and its Role in reducing the Administrative and Financial Corruption and Fraud. International Journal of Advanced Biotechnology and Research. 8(2). 268-283.
 Idris, M. I. (2012). The Impact of Ownership Structure and External Audit on Accruals and Real Activities Earnings Management in Jordan (Doctoral dissertation, University of Gloucestershire).
 Iturriaga, F. J. L., & Hoffmann, P. S. (2005). Earnings management and internal mechanisms of corporate governance: Empirical evidence from Chilean firms. Corporate Ownership & Control, 3(1), 17-29.
 Jensen, M.C., & Meckling, W.H. (1976). "The Theory of Firm: Managerial Behaviour: Agency Cost and Ownership Structure". Journal of Financial Economics, 3(4), 305-360.
 Jouber, H., & Fakhfakh, H. (2011). "Earnings management and board oversight: an international comparison". Managerial Auditing Journal, 27(1), 66-86.
 Katmon, N., & Al Farooque, O. (2017). Exploring the impact of internal corporate governance on the relation between disclosure quality and earnings management in the UK listed companies. Journal of Business Ethics, 142(2), 345-367.
 Kouaib, A., & Jarboui, A. (2014). External audit quality and ownership structure: interaction and impact on earnings management of industrial and commercial Tunisian sectors. Journal of Economics Finance and Administrative Science, 19(37), 78-89.
 Kumari, P., & Pattanayak, J. K. (2014). The role of board characteristics as a control mechanism of earnings management: A study of select Indian service sector companies. IUP Journal of Corporate Governance, 13(1), 58.
 Kusnadi, Y., Leong, K. S., Suwardy, T., & Wang, J. (2016). Audit committees and financial reporting quality in Singapore. Journal of business ethics, 139(1), 197-214.
 Latshaw, C. A., & Elifoglu, I. H. (2003). Consideration of fraud in a financial statement audit. Bank Accounting & Finance, 16(3), 27-33.
 Lin, J. W., & Hwang, M. I. (2010). Audit quality, corporate governance, and earnings management: A metaâ€analysis. International Journal of Auditing, 14(1), 57-77.
 Lin, Z., Liu, M., & Noronha, C. (2016). The Impact of Corporate Governance on Informative Earnings Management in the Chinese Market. Abacus, 52(3), 568-609.
 Loomis, C.J. (1999). "Lies, Damned Lies, and Managed Earnings". Fortune 140 (2), 74-92.
 Mashhadani, B.N. and Talab, H.R. (2013). The Role of Management Accountant In Implementing Corporate Governance Mechanisms. Journal of Economic and Administrative Sciences. 49(71). 454-473.
 Mohamed, D.M., & Habib, M.H. (2013). Auditor independence, audit quality and the mandatory auditor rotation in Egypt. Education, Business and Society: Contemporary Middle Eastern Issues, 6(2), 116-144.
 Okolie, A. O. (2014). Auditor tenure, auditor independence and accrual-based earnings management of quoted companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 2(2), 63-90.
 Piot, C., & Janin, R. (2007). External auditors, audit committees and earnings management in France. European accounting review, 16(2), 429-454.
 Raghunandan, K., Rama, D. V., & Read, W. J. (2001). Audit committee composition,â€œgray directors,â€ and interaction with internal auditing. Accounting Horizons, 15(2), 105-118.
 Shan, Y. G. (2015). Value relevance, earnings management and corporate governance in China. Emerging Markets Review, 23, 186-207.
 Shleifer, A., & Vishny, R. W. (1986). Large shareholders and corporate control. Journal of political economy, 94(3, Part 1), 461-488.
 Siam, Y. I., Laili, N. H., Khairi, K. F., & Jebreel, M. F. (2014). Audit Committee Characteristics, External Audit and Earnings Management among Jordanian Listed Companies: Proposing Conceptual Framework. In Proceedings of the Australian Academy of Business and Social Sciences Conference.
 Soliman, M. M., & Ragab, A. A. (2014). Audit committee effectiveness, audit quality and earnings management: an empirical study of the listed companies in Egypt. Research Journal of Finance and Accounting, 5(2), 155-166.
 Talab, H. R., Flayyih, H. H., and Ali, S. I., (2017). Role of Beneish M-score model in Detecting of Earnings Management Practices: Empirical Study in listed banks of Iraqi Stock Exchange. International Journal of Applied Business and Economic Research.15(23 part 2), 287-302.
 Talab, H.R. (2009). A Suggested Model for The Role of Management Accounting Implementing Corporate Governance Mechanisms. Master Thesis. University of Baghdad.
 Talab, H.R. (2015). The Impact of implementation of corporate governance mechanisms in reducing the expectations gap of fair value - Empirical Study in the Iraqi private companies listed in the Iraq Stock Exchange. Baghdad College of Economic Sciences. 45. 381-412.
 Al-Tamimi, A. (2015). The evolution in Islamic State administration: The documentary evidence. Perspectives on Terrorism, 9(4), 117-129.â€
 Abdul Hamid, F., Eddine, C. O., Ayedh, A. M., & Echchabi, A. (2014). Firms' financial and corporate governance characteristics association with earnings management practices: a meta-analysis approach. Economic Review-Journal of Economics and Business, 12(2), 49-72.â€
 Liu, Q., & Lu, Z. J. (2007). Corporate governance and earnings management in the Chinese listed companies: A tunneling perspective. Journal of Corporate Finance, 13(5), 881-906.
 Ali Shah, S., Butt, S., & Hassan, A. (2009). Corporate governance and earnings management an empirical evidence form Pakistani listed companies.â€
 Cohen, S. (2004). Social relationships and health. American psychologist, 59(8), 676.â€
 Vafeas, N. (2005). Audit committees, boards, and the quality of reported earnings. Contemporary accounting research, 22(4), 1093-1122.â€
View Full Article:
How to Cite
LicenseAuthors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under aÂ Creative Commons Attribution Licensethat allows others to share the work with an acknowledgement of the work''s authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal''s published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (SeeÂ The Effect of Open Access).