This study investigates the relationship between audit committee and board characteristics and earnings management by firms. The research aims to test the SEC, NYSE, and NASDAQ's implicit assertion that earnings management is positively correlated with poor corporate governance mechanisms. The study finds a non-linear negative relationship between audit committee independence and earnings manipulation, suggesting that a significant relation only exists when the audit committee has less than a majority of independent directors. Surprisingly, no significant association is found between earnings management and the more stringent requirement of 100% audit committee independence. The study also examines other corporate governance characteristics and their impact on earnings management. It finds that earnings management is positively related to whether the CEO sits on the board's compensation committee and negatively related to the CEO's shareholdings and whether a large outside shareholder sits on the board's audit committee. These findings suggest that boards structured to be more independent of the CEO may be more effective in monitoring financial accounting processes. The study concludes that boards and audit committees structured to be independent of management are best equipped to perform their oversight functions, providing more unbiased financial statements.This study investigates the relationship between audit committee and board characteristics and earnings management by firms. The research aims to test the SEC, NYSE, and NASDAQ's implicit assertion that earnings management is positively correlated with poor corporate governance mechanisms. The study finds a non-linear negative relationship between audit committee independence and earnings manipulation, suggesting that a significant relation only exists when the audit committee has less than a majority of independent directors. Surprisingly, no significant association is found between earnings management and the more stringent requirement of 100% audit committee independence. The study also examines other corporate governance characteristics and their impact on earnings management. It finds that earnings management is positively related to whether the CEO sits on the board's compensation committee and negatively related to the CEO's shareholdings and whether a large outside shareholder sits on the board's audit committee. These findings suggest that boards structured to be more independent of the CEO may be more effective in monitoring financial accounting processes. The study concludes that boards and audit committees structured to be independent of management are best equipped to perform their oversight functions, providing more unbiased financial statements.