Abstract
This study investigates the mediating role of managerial behavioral biases including overconfidence, optimism, and narcissism in the relationship between audit committee composite and earnings quality among manufacturing firms listed on the Iraq Stock Exchange from 2016 to 2023. The methodology is based on exploratory factor analysis (EFA) to construct latent variables, combined with panel regression techniques. Findings reveal that although the composite index of audit committee attributes (size, independence, and financial expertise) does not directly and significantly affect earnings quality ( = 0.016, p = 0.203), it exerts a significant positive indirect influence on financial reporting quality by reducing managerial behavioral biases. This mediating effect was statistically confirmed through the Sobel test (z = 5.65, p < 0.001) and bootstrap analysis (95% CI: [0.0085, 0.0343]). In other words, effective audit committees primarily enhance earnings quality by moderating managers’ cognitive and emotional biases not merely through direct oversight. These results carry concrete policy implications: regulators in Iraq and similar emerging markets should not only strengthen audit committee mandates but also integrate behavioral risk assessments into corporate governance codes. Specifically, requiring audit committees to evaluate and challenge managerial bias through training, disclosure requirements, or behavioral oversight mechanisms can significantly improve financial reporting integrity where institutional enforcement is weak.