This research aims at examining the impact of audit committees on earnings quality. The study ismotivated by the controversy of previous studies about performance of audit committee.Earnings quality is measured by Earnings Responsse Coefficient (ERC). Sample of thestudy consists of 97 manufacturing companies listed on the Jakarta Stock Exchange. Data iscollected using purposive sampling method. The ERC is estimated using pooled cross-sectionalcoefficient method (CRSM) and firm specific coefficient method (FSCM) in the observationperiod of 2001-2002.The result using CRSM and FSCM shows that audit committee firms ERC’s were biggerthan non audit committee firm ERC’s. These result showed that unexpected earnings of auditcommittee firms were responssed stronger than non audit committee firm because investorbelieve that noise of audit committee firms earnings were less than non audit committee firms.The result indicate that investors belive audit committees have done their responssibility tomonitor financial reporting process.
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