In relation to 1Malaysia Development Berhad scandal that happened recently indicates that the earnings manipulation still occurs in Government-Linked Companies (GLCs) in Malaysia. Previous accounting scandals had brought in negative consequences not just to the company but also to the stakeholders of the company. Accounting scandals that happened in previous years have brought up corporate governance and audit quality issues. Due to that reason, this study is conducted to examine the effect of corporate governance monitoring in mitigating earnings management of GLCs in Malaysia. This study employed quantitative research technique by using secondary data collection method which covered annual reports and financial database. There are nine independent variables under board, audit committee and external audit used in this study. The data on corporate governance monitoring mechanisms were taken from annual reports of 38 GLCs listed in Bursa Malaysia from 2015 to 2017. This study uses discretionary accruals as the proxy of the earnings management for dependent variable. The discretionary accruals were quantified by Modified Jones (1995). Thomson Reuter’s database was used to obtain the data on discretionary accruals. The data analysis was done by using descriptive statistics and multiple regression. The results showed that eight out of nine corporate governance monitoring mechanisms variables have an insignificant influence on earnings management of GLCs listed in Bursa Malaysia. The external audit fees is the only variable of corporate governance monitoring mechanism that has influence on earnings management. Thus, the findings indicate that external audit fees can influence in mitigating earnings management of GLCs listed in Bursa Malaysia. This research has documented the evidence that corporate governance monitoring mechanisms except audit fees do not have influence in mitigating the earnings management of GLCs. It indicates that only audit fees in line with the agency theory to reduce the agency problems.
