A Study On The Correlation Between Audit Committee Characteristics And Earnings Quality

China’s capital market has developed rapidly since 1990.The listed companies continue to increase and the majority of investors swarm into it. But investors, creditors, regulators and other stakeholders can only make decisions through the information disclosed by the listed companies, in which the most concerned information is usually the company’s earnings information.To improve the quality of earnings, all sectors of society are actively exploring effective ways.The effect of corporate governance on improving earnings quality has been widely recognized. The audit committee system is an important part of corporate governance structure, the process can be generated from the financial report in strengthening supervision, it also can effectively improve the information asymmetry between managers and investors, and improve the independence of the internal and external auditors and contribute to the improvement of corporate governance structure and the company’s earnings quality.The audit committee system originated in western countries, and now has developed much better, but time for the introduction of audit committee system in China is shorter, the system construction is still in the initial stage. Now, the listed companies set up the audit committee basically under the compulsory, but based on our immature market environment and institutional structure, China’s audit committee still have many problems. The composition and structure of the internal audit committee efficiency play a decisive role in its operation.What kind of features can give full play to its functions and realize the expectations to improve the quality of earnings? This is the question that this paper wants to discuss.First, this paper reviews the domestic and foreign scholars’ research results and summarizes the role of the audit committee on improving the earnings quality. On this basis,we put forward the hypothesis of this paper. In this paper, we use A-share main board companies’ data in the stock markets of Shanghai and Shenzhen from 2009 to 2014 as the research object.And we also use the research results of Paul(2013) and Yuan Dong(2015) for reference, use abnormal audit fees as an indirect proxy of earnings quality. We collect some data manually and get the empirical results through empirical research methods based on the analysis of the relationship between audit committee characteristics and earnings quality. The results of the empirical analysis in this paper are as follows:(1) the independence of the audit committee of listed companies in our country and financial professionalism are significantly negative related to abnormal audit fees, namely, the stronger the independence, the higher professionalism of the audit committee can improve the company’s earnings information. Independent directors inaudit committee and financial experts completed the expected from all walks of life to them;(2) the audit committee members of the management team will inhibit the earnings quality but will not seriously affect the earnings quality of company;(3) the empirical results also shows that the expansion of audit committee size does not significantly bring higher earnings quality;(4) compared with the state-ownedlisted companies, the non-state-owned listed companies get better play to the efficiency of the audit committee. At last, some countermeasures and suggestions are put forward to improve the system of earnings quality and audit committee.