Abstract:
The study aims to examine the influence of audit committee
characteristics on the earnings management of listed companies in Sri Lanka.
Secondary data of listed firms on the Colombo Stock Exchange (CSE) was
collected for the five-year period from 2017 to 2021. For data analysis, 107
companies listed on CSE were selected as samples, and a quantitative technique
was employed. Audit committee size, audit committee independence, audit
committee financial expertise, and audit committee meetings are proxies for
audit committee characteristics while firm size and leverage are considered as
control variables. This study used discretionary accruals as a signal of the
presence of earnings management. The techniques of Pearson’s Correlation and
panel data regression were employed to estimate the association between the
audit committee characteristics and earnings management. The empirical
findings reveal that audit committee independence and audit committee
meetings significantly influence the earnings management of listed companies in
Sri Lanka. Therefore, there is strong evidence that a low level of audit committee
independence and audit committee meetings have a major effect as a device in
mitigating earnings management. This study contributes significantly to
improving one's understanding of the interactive role of audit committee
characteristics.
