This research investigates the influence of establishment both independent directors and audit committee on earnings management. The research samples are selected from the Market Observation Post System of Taiwan from 2002 to 2010. This study adopts discretionary accruals as the measurement indicators of earnings management. The re-sults show that the establishment of independent directors is significantly negative asso-ciated with earnings management. This means that the companies have established in-dependent directors with less extent of earnings management. In addition, this research examines whether there are more numbers of independent directors with less extent of earnings management. The empirical results show that it is not significantly associated. Moreover, the establishment of audit committee is not significantly associated with earnings management. This shows that the companies have established audit committee system likely confining the act of earnings management.
This research further classifies the samples of discretionary accruals as positive group and negative group . The results show that the proportion of independent direc-tors is significantly negative associated with the companies in negative group. This means that the higher numbers of independent directors are, the more reducing earnings’ companies confine. The results also show that the audit committee is significantly nega-tive associated with the companies in positive group. This implies that companies have established audit committee likely confining their earnings increase.
