International Business Research; Vol. 10, No. 10; 2017 ISSN 1913-9004 E-ISSN 1913-9012 Published by Canadian Center of Science and Education 39 Does the Monitoring Mechanisms Considered as Dilemma against the Practices of Earnings Management Dea'a Al-Deen Omar Al-Sraheen 1 , Isam Hamad Saleh 1 1 Department of Accounting, College of Business, Al-Zaytoonah University of Jordan, 11733, Amman, Jordan Correspondence: Dea'a Al-Deen Omar Al-Sraheen, Department of Accounting, College of Business, Al-Zaytoonah University of Jordan, 11733, Amman, Jordan. Received: June 26, 2017 Accepted: August 22, 2017 Online Published: September 7, 2017 doi:10.5539/ibr.v10n10p39 URL: https://doi.org/10.5539/ibr.v10n10p39 Abstract This paper mainly aims to explore the role of monitoring mechanisms in limiting the earnings management practices among service firms in Jordan. The data used in this study were from the financial annual reports of 59 ASE listed service firms in 2015. The results of multiple regression analysis demonstrate the fairly varied influence of board of directors’ v ariables. This paper presented three hypotheses covering board independency, CEO duality and audit committee. According to the results, internal monitoring mechanisms significantly impact the level of the practices of earnings management and the reduction of the agency conflict. Additionally, the regulatory bodies in Jordan should focus more on the role of internal monitoring mechanisms in Jordanian companies in terms of effectiveness in order to improve the quality of financial reports can be improved via the assurance of high quality of earnings. Finally, this study becomes a catalyst for more research on quality of financial reports and earnings quality in Jordan and other countries where there is still lack of studies in this domain. Keywords: earnings management, CEO duality and audit committee 1. Introduction The financial reports’ users have become cautious and skeptical about the financial statements particularly in terms of quality following the cases of reporting irregularities and unacceptable accounting practices of WorldCom and Enron in the U.S.A, and of One.Tel, HIH Insurance Harris Scarfe in Australia. The financial information provided in the financial statements is a primary source for investors in making decisions and these cases have robbed their confidence on information reliability that the listed firms provide (Liu, 2012). Accounting alternatives are believed by many to enable corporate managers to opportunistically manage earnings and this may impart adverse impact on the quality of reported earnings and their application in the decision making process (Khalil & Ozkan, 2016). Many explanations have been offered by past studies as to the reason the corporate managers may have the inclination to be manipulative in reporting the earnings. As suggested, corporate managers seek to earnings management practices for attaining some capital market and contractual objectives. These include evading debt covenants violation, raising their compensation share, fulfilling or going beyond the expectations of analysists and also, smoothing the reported earnings (Abed, Al-Badainah & Serdaneh, 2012; Al-Sraheen, 2016) It is common for the practices of earnings management to lead to grave corporate fraud. For instance, the subprime mortgage crisis that happened in 2007 caused grave crisis to the world economy while established firms including Lehman Brothers and Merry Lynch were pushed into bankruptcy owing to the managers’ practice of earnings management. As stated by Lin and Wu (2015), these events have harmed firms’ financial structure and the global economy. Also, the incidences of bankruptcy among globally established companies have shown how valuable corporate governance is. Many countries have imposed many laws to fortify the corporate governance mechanisms (the Sarbanes-Oxley Act of 2002 in the United States is among of the critical steps to attained improved quality of financial statements) (Lin & Wu, 2015). In the context of Jordan, since 2009, its regulatory authorities have also imposed many principles to reinforce corporate governance mechanisms. This, according to Al-Sraheen (2016) and Mohammad, Wasiuzzaman and Nik (2016), is as precautionary steps for dealing with risks of corporate bankruptcy.