The purpose of this study is to examine the relationship between the effectiveness of the Audit committee (AC) and earnings management, as measured by discretionary accruals, and to develop a thorough understanding of the moderating effect of audit quality on this relationship.
This study uses a sample of 151 French firms listed on the CAC ALL shares index for the period 2014–2021. Two models are developed and tested by using feasible generalized least square (FGLS) regressions.
Based on a panel of 1,208 French firm-observations from the period 2014 to 2021, this study finds that audit quality moderates the relationship between AC effectiveness and earnings management, as measured by discretionary accruals.
This study explores the relationship between AC effectiveness, measured by a score-earnings management, and audit quality as a moderating variable. It also examines discretionary accruals in the French context, which has distinct auditing characteristics.
This study innovatively examines the moderating effect of external audit quality on the relationship between AC effectiveness and earnings management, a topic largely overlooked in prior research. To our knowledge, no previous studies have addressed this in the French context or elsewhere. Using a specific index to assess AC effectiveness enhances the analysis’s precision, filling a crucial gap and providing valuable insights into corporate governance dynamics and earnings management through accruals.
