This study examines the links between corporate governance, income smoothing, and informativeness in financial reporting. Firms’ strong corporate governance is measured by variables employed in other studies – the presence of a financial expert serving on the audit committee; whether the audit committee consists entirely of independent directors; whether the members of the audit committee meet at least four times annually; and the percentage of outsiders serving on the board of directors. Income smoothing is measured by the Albrecht-Richardson (AR) and Tucker-Zarowin (TZ) income smoothing measures. The AR measure encompasses four definitions of earnings that include accrual and cash-based transactions. The TZ measure includes only accrual-based transactions. The degree of informativeness is measured by association with two opposing ends of the spectrum. On the one hand, firms that are the most informative are predicted to have a greater association between earnings and one period ahead operating cash flows. Prior researchers have defined in a similar manner the information content of earnings to predict cash flows. On the other hand, the existence of a regulatory violation clearly indicates firms’ lack of informativeness (i.e., deceptiveness) in financial reporting. The results do not show a strong relationship between strong corporate governance and degree of income smoothing. First, results for the link between income smoothing and informativeness show only a strong, positive association between accrual-based income smoothing (i.e., TZ measure) and informativeness. Second, results for the links between deceptiveness, corporate governance, and income smoothing are weak. The corporate governance variables show no significant association with deceptiveness. A negative relationship between corporate governance and deceptiveness was predicted. For the link between income smoothing and deceptiveness, only the AR measures show the predicted negative relationship. The TZ measure shows no significant association with deceptiveness. Taken together, the results of this study provide unique insights into the links between corporate governance, income smoothing, and informativeness in financial reporting. The results confirm the informativeness of accrual accounting, but do not resolve the debate of whether corporate governance measures impact the quality of financial reporting.

我國為改善公司治理制度，於2005年12月20日立法院三讀通過大幅修正證券交易法，引進審計委員會制度。審計委員會較獨立董事更專注於財務面之監督，故本研究之研究期間為1998年至2010年，以設置審計委員會之企業為樣本，進行配對，以探討審計委員會與企業財務報表品質之關聯性。 研究結果顯示，假說一：設置審計委員會或準審計委員會之企業財務報表品質優於未設置者；及假說二：設置審計委員會或準審計委員會後之企業財務報表品質優於設置前，二者皆不成立。 設置審計委員會目前已是公司治理發展的趨勢，我國既已立法引進審計委員會制度，主管機關應評估企業設置審計委員會後實際之運作情形，是否達到預期之效果，並做必要之修改或配套措施，以使審計委員會之設置不流於形式。 / In Taiwan, for the purpose of improving the corporate governance and introducing regulation of the audit committee, the Securities and Exchange Act was revised and passed by the Legislative Yuan for the Third Reading on 20 December, 2005. This study takes companies had established the audit committee between 1998 and 2010 as a sample so as to discuss the relation between the audit committee and the quality of financial reporting. The result of our research revealed that, the first hypothesis: “the quality of the financial reporting of the company with the audit committee is superior” and the second hypothesis: ” the quality of the financial reporting of the company after establishing the audit committee is superior” were both not sustained. Establishing the audit committee has become the trend in the development of corporate governance. Besides the regulations enacted, it’s of greater importance to evaluate the substantive effectiveness than the surficial form of the audit committee in companies.