The Audit Committee On Earnings Management Inhibit The Utility Of Durative Research

Audit committee in corporate governance is an important institutional arrangements, in the Anglo-American and other Western countries, its development has been very mature. According to the experience of developed countries, the Audit Committee to improve the quality of financial information and protect the interests of investors play a very important role. In view of this, the former State Economic and Trade Commission and China Securities Regulatory Commission in early 2002, jointly issued the "Corporate Governance Guidelines," provides that "the Board of directors of listed companies can follow the relevant resolutions of the shareholders' meeting, to set up strategy, audit, nomination, remuneration and assessment and other special committees." "Since then, the audit committee system in China was formally established. In order to further improve the governance structure of listed companies, improving corporate governance, Chinese Securities Supervisory Association had issued the"Notice on the Matters concerning Carrying out a Special Campaign to Strengthen the Corporate Governance of Listed Companies"in March,2007.It clearly requested that listed companies should make self-examination and explain if the company has set up subordinate committees under the board of directors,such as nomination committee,salary committee,audit committee,strategic investment committee etc. Although the audit committee system has begun to develop in China, China Securities Regulatory Commission has required mandatory information disclosure of listed companies to establish audit committee of the situation, but the Audit Committee setting up in China is still in the voluntary phase of the audit committee so that the effective functioning of the system is still a the problem.Based on the theory of asymmetric information and principal-agent theory, starting from the establishment of the Audit Committee, the Audit Committee's role in suppression of earnings management was validated analysis, and use 2007 to 2010 in Shanghai and Shenzhen company data is sustained suppression of the Audit Committee evidence of earnings management is used to examine the effectiveness of the system operation. This paper mainly consists of five major sections. The first part introduces the research background of the article, the purpose and significance, methods and innovations as well as papers framework; second part is mainly for domestic and international literature was reviewed; third part focuses on the audit committee and earnings management theory building ; the fourth part is the empirical research on the audit Committee and the relationship between the earnings management hypothesis, the source of the sample introduction and data filtering, and build this paper model by descriptive statistics, correlation statistics, regression testing and analysis other means of earnings management on the audit committee of the inhibitory effect was sustained empirical research; fifth component is the fourth part of the paper obtained on the basis of empirical research findings, conclusions and recommendations for the final summary of the limitations of this study . Through the study found:Audit Committee have inhibitory effect on earnings management with a lag, the Audit Committee in the establishment of the following year was a significant inhibition of earnings management. But in the third year after its establishment, the regression results did not pass the test of significance, but still showed a negative correlation. This shows that the Audit Committee does not produce sustained inhibition of earnings management utility. China's audit committee is a short-term inhibition of earnings management, the audit committee system does not function effectively and achieve the desired results.