This thesis investigates the association between increasing auditor independence proposed by CLERP 9 and earnings management by firms in Australia. The examination was conducted using two groups of listed entities, in an event study approach (pre- and post-CLERP 9 periods) covering the financial years 2003 to 2006. The first group of listed entities comprised of firms in the ASX 100, which are referred to in this thesis as 'compliant' firms, while the second group consisted of firms in the ASX Small Ordinaries Index, referred to in this thesis as 'emerging firms'. This approach is unique compared to the current practices of the literature. The results allow an insight into these two distinct groups of firms. Results reported from the pooled regression models indicated a dispersed effect on earnings management in the post-CLERP 9 period for the ASX 100 group. However, no evidence of an effect of CLERP 9 could be detected for the ASX Small Ordinaries group. This brings into question the expectation from prior research and anecdotal evidence that a reaction to CLERP 9 could in fact be detected. Also evidence was provided of a significant association between earnings management discretionary accruals activity and auditor independence in the ASX 100 group, but not for the ASX Small Ordinaries group, suggesting that when auditor independence is low, there are higher levels of earnings management.