| Financial Accounting Standard in Indonesia provides flexibility in choosing the method of accounting to present the information in the financial statements. Flexibility is likely to be used by manager to manipulate earnings through accounting choices that can decrease and increase earnings because earnings is the information that is often used as a basis for decision making by the stakeholders. This study uses two research model. First model examine the association between female executives, stock option compensation and audit committee expertise and accounting choices. The second model examine the effect of accounting choices on earnings quality. The accounting choices used in this study is inventory method, leasing and interest cost. Earnings quality measured by Earnings Response Coefficient (ERC). This study uses data of 293 manufacturing companies listed in Indonesia Stock Exchange in the period 2008-2011. The analysis method used for the first model is logistic regression, for the second model is multiple linear analysis method. The results indicate that stock option compensation is associated with income increasing accounting choices. In contrast, women executives and audit committee expertise showed different correlations with the hypothesis and have no significant relationship with the selection of accounting methods. Accounting choices has no significant effect on earnings quality. |