Contents lists available at ScienceDirect Journal of High Technology Management Research journal homepage: www.elsevier.com/locate/hitech Earnings manipulations and board's diversity: The moderating role of audit Amel Kouaib a,b, ⁎ , Abdullah Almulhim a a King Faisal University, Department of Accounting, Saudi Arabia b Faculty of Economics and Management of Sfax, Department of Accounting, Tunisia ARTICLE INFO Keywords: Gender diversity Directors' nationality Audit index Earnings management Europe ABSTRACT This paper analyzes whether an audit index moderates the relationship between boardroom composition (gender diversity and foreign directors) and earnings-management activities in the European context. Data from a sample of 429 European firms listed on Stoxx Europe 600 Index from 1998 to 2017 are used to test a moderation model. Evidence reveals that board gender diversity is negatively associated with both accruals-based and real earnings management ac- tivities, while non-European directors are positively associated with the earnings-management activities. Further, audit index significantly moderates the link between board diversity and earnings-management. This study is unique in providing European evidence for the moderating effect of audit quality on the link between the demographic features of board members and the firm outcome. This paper is also relevant as it develops a composite index of audit quality. 1. Introduction Academic researchers have recognized significant variations in individuals' diversity, dictated by gender and ethnic group that can affect corporate decision-making processes (Duong & Evans, 2016; Harris, Karl, & Lawrence, 2019; Lakhal, Aguir, Lakhal, & Malek, 2015; Reggy, Niels, Lars, & Trond, 2019). Females have been observed to be more risk averse and more independent-minded than their male counterparts (Lago, Delgado, & Castelo Branco, 2018; Adams & Funk, 2012). Consequently, females exhibit a high oversight level. The presence of foreign directors on a corporate board enhances board competency due to their different exposure in terms of governance practices, knowledge, skills, and culture representativeness (Miletkov, Poulsen, & Wintoki, 2017; Reggy et al., 2019; Ruigrok, Peck, & Tacheva, 2007). Since foreign directors are not connected with closed domestic networks, they tend to become independent from management, which signals to investors that the firm is professionally managed and that their rights are safeguarded. Consistent with agency theory, it is important for resource-rich composed boards to have an expanded audit scope to protect the reputational capital. A significant relationship is thus established between board diversity, e.g. ethnicity and gender, and the choice of auditor (Ahmad, Houghton, & Yusof, 2006). Culturally diverse boardroom directors, when correctly pooled together, are con- sidered as assets through which group processes can be improved and solutions to problems can be found. However, demographic diversity among directors may also generate conflicts due to information asymmetry and low commitment among members. The consequences of corporate governance failures have caused regulators to examine how boardroom composition and functions could be reformed to provide an effective monitoring function (Ararat, Aksu, & Cetin, 2015). Although many studies have examined board https://doi.org/10.1016/j.hitech.2019.100356 ⁎ Corresponding author. E-mail addresses: akauaib@kfu.edu.sa (A. Kouaib), amalmulhem@kfu.edu.sa (A. Almulhim). Journal of High Technology Management Research xxx (xxxx) xxxx 1047-8310/ © 2019 Elsevier Inc. All rights reserved. Please cite this article as: Amel Kouaib and Abdullah Almulhim, Journal of High Technology Management Research, https://doi.org/10.1016/j.hitech.2019.100356