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directors. Experts in finance, in law, and in the firm's products and services bring value through diverse expertise; international directors bring value through diverse cultural experiences; and directors who are exposed to other boards add value by bringing diverse perspectives to board discussions. Effectively, each type of diversity broadens the scope of action and brings more perspectives to the board's attention. In a similar vein, female directors who are exposed to different experiences than men 4 (Hillman, Shropshire, and Cannella 2007) could enrich the discussions and improve the decisions made by the board.Research in organizational theory reveals that gender-diverse boards have more informed deliberations and discuss tougher issues that are often considered unpalatable by all-male boards (Clarke 2005;Huse and Solberg 2006;Stephenson 2004;McInerney-Lacombe, Billimoria, and Salipante 2008). Female participation also promotes more effective board communication (Joy 2008) to investors. Together, more informed board discussions and better communication improve the board's monitoring ability (Terjesen, Sealy, and Singh 2009;Groom 2009). Recent literature in finance (Adams and Ferreira 2009) shows that female directors exhibit greater diligence in monitoring and assume positions on committees charged with transparent reporting and earnings quality, such as auditing and corporate governance committees. In a recent working paper, Adams, Gray, and Nowland (2010) argue that female directors exhibit more independent thinking and improve the monitoring process. They further show that investors value the addition of female directors to the board. Jointly, better monitoring and lower information asymmetry facilitate better earnings quality.In our tests we use two measures of earnings quality. Our first measure is discretionary accruals quality (McNichols 2002;Francis, LaFond, Olsson, and Schipper 2005), computed as the absolute value of the estimation error in accruals after controlling for current, past, and future cash flows, sales and long-term assets, and operating cycle and volatility in sales. Our use of this measure is based on the argument in Francis et al. 2005 that discretionary accruals quality is (i) attributable to managers' estimates and accounting implementation decisions (in contrast to innate factors that are slow to change and attributable to the business model) and (ii) priced by investors' more than abnormal accruals and other proxies for accruals quality. Our second measure of earnings quality is the lower propensity among firms whose unmanaged earnings are just shy of earnings benchmarks to manage earnings and beat the benchmarks by a small amount. 5 Small increases (over the prior year's earnings) and surprises (over the analyst forecasts) constitute earnings components that are not likely to be related to firm performance. 6 We also conduct additional tests in which earnings quality is measured by lower performance-adjusted discretionary current accruals (Kothari, Leone, and Wasley 2005). Af...

We examine whether the presence of female directors and female audit committee members affect audit quality in terms of audit effort and auditor choice by using observations from a sample of U.S. firms, spanning the years 2001-2011. We find, after controlling for endogeneity and other board, firm, and industry characteristics, that firms with gender-diverse boards (audit committees) pay 6 percent (8 percent) higher audit fees and are 6 percent (7 percent) more likely to choose specialist auditors compared to all-male boards (audit committees). Our findings suggest that boards (audit committees) with female directors (members) are likely to demand higher audit quality, ceteris paribus. Mixit e des conseils d'administration, honoraires des auditeurs et choix des auditeursR ESUM E Les auteurs se demandent si la pr esence de femmes parmi les administrateurs et les membres du comit e d'audit influe sur la qualit e de l'audit, en ce qui a trait au travail d'audit et au choix des auditeurs, en etudiant les observations qu'ils tirent d'un echantillon de soci et es des Etats-Unis, entre 2001 et 2011. Une fois contrôl ees l'endog en eit e et les autres caract eristiques du conseil d'administration, de la soci et e et du secteur d'activit e, ils constatent que les soci et es dont les conseils d'administration (comit es d'audit) sont mixtes versent des honoraires d'audit 6 pour cent (8 pour cent) plus elev es et sont 6 pour cent (7 pour cent) plus susceptibles de choisir des auditeurs sp ecialis es que les soci et es dont les conseils d'administration (comit es d'audit) sont enti erement masculins. Les constatations des auteurs semblent indiquer que les conseils d'administration (comit es d'audit) mixtes sont susceptibles d'exiger une qualit e d'audit sup erieure, toutes choses egales par ailleurs.

Accepted by Dan Simunic. This paper has benefited greatly from comments and suggestions from the editor and two anonymous reviewers on earlier versions. We are also grateful for numerous comments received at various workshops.

Family firms are characterized by less separation between ownership and control (Type 1 agency problem), but greater conflict of interest between controlling insiders and non-controlling outside investors (Type 2 agency problem). Although strong board governance is known to decrease the Type 1 agency problem, its effectiveness in mitigating the adverse consequences of the Type 2 agency problem has not been well documented in the literature. We show that strongly governed family firms are more likely to choose specialist auditors and exhibit higher earnings quality than nonfamily firms. Weakly governed family firms demand lower audit effort and exhibit earnings quality that is no different from that of nonfamily firms. Within family firms, we show that strongly governed family firms choose higher quality audits in the form of a greater use of specialist auditors and higher audit efforts, and exhibit higher earnings quality than other family firms. These findings provide consistent evidence that strong board governance can effectively mitigate the adverse consequences of the Type 2 agency problem on financial reporting and transparency in family firms. Data Availability: The data used are available from the public sources identified in the study.