April Klein finds a negative relation between audit committee independence and earnings management. 10 This finding is consistent with the idea that a lack of independence impairs the ability of boards and audit committees to monitor management. On the other hand, audit committees of corporate boards are typically not very active. They usually meet just a few (two or three) times a year. Therefore, even if the committee is comprised of independent directors, it may be hard for a small group of outsiders to detect fraud or accounting irregularities in a large, complex corporation in such a short time. Consistent with this idea, Mark Beasley finds no difference in.
