Earnings management — the use of managerial discretion within accounting principles to report results that differ from true underlying economic performance — represents one of the most pervasive information quality problems in capital markets. India's experience with high-profile cases — the Satyam Computers accounting fraud (2009), the Infrastructure Leasing and Financial Services collapse (2018), and numerous NBFC and real estate accounting irregularities — has driven progressive reform through the Companies Act 2013 mandatory audit committee provisions, SEBI's Internal Controls over Financial Reporting (ICFR) requirement, and the ICAI audit quality review programme. This study examines the relationship between audit quality, corporate governance quality, and earnings management across 312 BSE/NSE-listed companies from 2016-2024, using modified Jones model discretionary accruals as the primary earnings management proxy. Audit quality is measured through auditor size (Big4, national mid-tier, small regional), audit fees, auditor tenure, and audit report lag. Fixed-effects panel regression confirms that Big4 auditor engagement reduces |DA| by 62% relative to small regional auditors (β=−0.062, p<0.001); post-ICFR mandatory adoption reduces |DA| by 38% (β=−0.042, p<0.001). The USC collaboration contributes the accrual quality measurement methodology and cross-country comparison with US and European audit quality research
Priyanka Bose (Sat,) studied this question.