Earnings Management and Corporate Governance in Bangladesh (the Role of the Board and the Audit Committee)

9321 Words Jun 21st, 2013 38 Pages
Internship Report On Earnings Management and Corporate Governance in Bangladesh (The Role of the Board and the Audit Committee)

Prepared for: Mr. Shubhankar Shil. Assistant Professor, School of Business University of Liberal Arts Bangladesh (ULAB)

Prepared by: Rashed Hossain ID: 092011001 Concentration: Finance School of Business University of Liberal Arts Bangladesh (ULAB)

April 27, 2013

Mr. Shubhankar Shil. Assistant Professor, School of Business University of Liberal Arts Bangladesh (ULAB)

Subject: Internship report on “Earnings Management and Corporate Governance in Bangladesh (The Role of the Board and the Audit Committee)”

Dear Sir: With due respect and honor that I have the great pleasure and opportunity to
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In Bangladesh most of the companies manage their earnings for different purposes. In particular, this paper examines the roles board, audit committee, board size, and number of board meeting to reduce earnings management practices in Bangladesh. The Blue Ribbon Panel recommends, among other things, that board members serving on audit committees should be financially sophisticated to help detect earnings management. Earnings management is a strategy used by the management of a company to deliberately manipulate the company's earnings. So that, the figures match a pre-determined target. The purpose of this study is to find out the role of board and audit committee to prevent earning management in the context of DSE listed companies in Bangladesh. In many companies, managers are compensated both directly (through salary and bonus) and indirectly ( prestige, future promotions, and job security) depending on firm’s earnings performance related to some pre -established targets . Opportunity of earnings management is provided to the firms by GAAP allowing them the use of accrual accounting. Besides the management compensation problem, earnings management could mislead investors by giving them false information. In fact, investors use financial information to decide whether to buy, sell, or hold securities. Market efficiency is based on the information flow to capital markets so that when
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