The Impact of Corporate Governance and external audit on controlling discretionary accruals: A study of impacts on earnings management based on FTSE350, UK.

While the interest of shareholders contradicts with the interests of the managers, agency problem appears. However, the principle of the agency theory is to establish the relationship between the shareholders and managers; and this thesis relies on the involvement of corporate governance and external audit who can resolve the issues between them. The main aim of this study is to identify the impact of corporate governance and external audit on controlling the discretionary accrual based on the FTSE350, in the UK. This study has considered the performance matched discretionary accruals to measure the magnitude of the discretionary accruals. The monitoring devices are established in the segmenting the models in two different categories; these are corporate governance and external audit. There are two models; first model and second model, formed and the hypotheses are created based on those attributes of the corporate governance and external audit. This study has considered the data from FTSE350 index of the UK; from 2014 – 2019. The variables of the first model; non-executive director’s fees and block holders are positively associated while managerial ownership and non-executive director’s meeting are negatively associated at 0.05 significant level. Further, remuneration committee independence is posi- tively associated with earnings management at P-value<0.1. On the other hand, the variables of second model, non-audit fee is positively associated whereas audit fee, Auditors with industrial specialism, audit expertise are negatively associated at P-value<0.05.