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The effectiveness of monitoring mechanisms for constraining earnings management: a literature survey for a conceptual framework

Saleem, F. and Alifiah, M. N. and Tahir, M. S. (2016) The effectiveness of monitoring mechanisms for constraining earnings management: a literature survey for a conceptual framework. International Journal of Economics and Financial Issues, 6 (3). pp. 209-214. ISSN 2146-4138

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Abstract

Recently, financial crisis and high profile corporate scandals in the United States, Europe and East Asia, have brought corporate governance and audit quality issues to the forefront in developing countries, emerging markets and transitional economies. In fact, the main issue involves manipulation of accounting data which lose investor confidence and trust in the financial reports. In order to enrich investor confidence and trust regarding financial reporting quality, firms need to adopt effective monitoring mechanisms. In relation to that, this paper proposes a conceptual framework to investigate the role of regulatory mechanisms concentrating on corporate governance and external audit for mitigating earnings management. Evidence from previous studies supports the proposed model. Hence, the extant study argues that firms with effective monitoring mechanisms in the form of corporate governance and external audit are less likely to allow earnings management because opportunistic earning’s cause uncertainty about the economic value of a firm.

Item Type:Article
Uncontrolled Keywords:bankruptcy, corporate governance, earnings management
Subjects:H Social Sciences > HD Industries. Land use. Labor
Divisions:Management
ID Code:72413
Deposited By: Narimah Nawil
Deposited On:21 Nov 2017 16:17
Last Modified:21 Nov 2017 16:17

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