Audit Committee Financial Experts’ Role in Constraining Earnings Management: A Narrative Review and Integrated Model

Audit committee effectiveness has gained considerable attention due to accounting scandals and earnings manipulation cases. In this article studies have been reviewed that empirically examined the audit committee’s role in mitigating earnings management by focusing on three perspectives; legalistic approach, resource dependence and agency theory. Based on these perspectives an integrated model has been developed highlighting the role of audit committee in its task of constraining earnings management. The review reveals that audit committee independence, activity, expertise and composition are major determinants of audit committee effectiveness to improve their oversight role and confine earnings management however the busyness and connectedness of members of AC is impacting their monitoring performance. The review concludes by offering an agenda for future studies in this promising area of audit committee effectiveness.