This study investigates the effect of audit committee characteristics, specifically gender diversity and accounting expertise, on the financial performance of Iraqi non-financial listed firms, with earnings management serving as a mediating variable. The sample comprises 35 firms listed on the Iraq Stock Exchange over 13 years (2011–2023). A two-step system Generalised Method of Moments (GMM) estimator was employed to address issues of endogeneity, heterogeneity, and simultaneity. The results reveal that audit committee accounting expertise significantly improves accounting-based measures of financial performance (ROA and ROE), although its effect on market valuation (Tobin’s Q) is negative. Gender diversity demonstrates a significant negative effect on performance but reduces earnings management, highlighting its role in strengthening monitoring effectiveness. Earnings management itself exerts a dual effect: it temporarily increases shareholder returns (ROE) but reduces asset profitability (ROA) and market valuation (Tobin’s Q). Mediation analysis confirms that earnings management partially mediates the relationship between audit committee attributes and financial performance, particularly with respect to ROA and Tobin’s Q. Overall, this study contributes to the corporate governance literature from an emerging market perspective by providing evidence on how audit committee structures influence both financial reporting quality and firm performance. The findings have important implications for policymakers, regulators, and stakeholders, emphasising the need to enhance audit committee effectiveness to reduce earnings manipulation and ensure sustainable financial performance in Iraqi firms.
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