Management Power,Audit Committee Effectiveness,and Earnings Management

In 2002,the U.S.government enacted the Sarbanes-Oxley Act which aims to maintain the effective operation of the capital market and protect the immediate interests of investors,this act provided legal protection for the audit committee system.As an important arrangement of the corporate governance structure,the audit committee system's responsibilities include reviewing and evaluating financial report quality,supervising internal control and internal audit agencies and improving the quality of external audit.In foreign countries,the audit committee has had a significant effect in curbing management earnings management behavior,discovering internal control deficiencies,and improving the quality of accounting information and financial reports.However,owing to the interference of many factors such as lack of system,control of large shareholders and management intervention,the supervision of the audit committee is not obvious in Chinese listed companies.In 2013,the Shanghai Stock Exchange promulgated guidelines for the operation of the audit committee,which stipulated in detail the composition and responsibilities of the audit committee.So,wether the guideline can promote the audit committee's performance of functions and improve the effectiveness of supervision,and ensure the effective operation of the system,this is an issue to be tested.At first,this article reviews the related literature about the audit committee effectiveness' measure methods,and the relation between the audit committee independence and professional and earnings management,and management power'inhibition effect on audit committee effectiveness.And then,the paper summarizes the current research status and insufficient research.At the same time,on the basis of the principal-agent theory,information asymmetry theory and management power theory,this paper expect that the audit committee independence and professional can play a role in inhibiting real and accrued earnings management,and when management power is sufficiently large,it can weaken this inhibition.Based on previous literature research and China's current institutional background,from the perspective of real earnings management,this paper selects A-share listed companies on the Stock Exchange from 2014 to 2016 as research samples to examine the effectiveness of the supervision function of the audit committee of listed companies in China,and the weakening effect of management power on the suppression effect of the audit committee.This article uses the multiple regression method to test the relation between the effectiveness of the audit committee and the real and accured earnings management and the management power'inhibition effect on audit committee effectiveness.This pepar has empirical results as follows.First,the audit committee independence has a negative relationship with the overall level of real and accured earnings management,and the relation has significant.Second,Between the professiona of the audit committee and real and accured earnings management,there is a significant negative correlation.Third,compared to the listed company does not have the nonpowerful executive,the company,audit committee who has powerful executive will exist in form,not in fcat.This means that powerful executive will effect audit committee'effectiveness,and then audit committee can not restain real and accured earnings management in company.Based on the empirical results,the paper proposes the following suggestions,(1)improving the audit committee system,paying attention to the independence of audit committee in sunstance,not in form,improving the professional of the audit committee;(2)strengthen to control the supervision of earnings management;(3)Improving the constraint mechanism of executive power.