<![CDATA[This research examines the effect of existence of audit committee andqualified auditor on the relationship between company’s size and leverage,and earnings management. This study is motivated by inconsistence resultsof previous studies on this topic. Supported by agency theory explainingproblem between the agent and the principal, researcher is motivated tocontribute on the importance of monitoring management performance by auditcommittee and qualified independent auditor.Sample consists of 364 manufacturing companies listed on the JakartaStock Exchange during 1999-2003. Earnings management is measured bydiscretionary accrual calculated using modified Jones Model. The effect ofaudit committee on the relationship between size and leverage is tested usingcoefficient difference test.The result shows that large companies tend to have small discretionaryaccrual, thus it would have better quality earnings. The existence of auditcommittee could reduce the effect of leverage on earnings management.Qualified auditor could diminish the effect of size and leverage on earningsmanagement.]]>
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