This study investigates the influence of board monitoring and management contracting on earnings management. The strengthening of corporate governance following the Enron era was designed to gain investors’ confidence and ensure the truthfulness of financial information. Contracting is employed as an instrument to align the interests of agents with those of shareholders which are ultimately to maximise the value and minimise monitoring costs. By developing measures of board monitoring in accordance with the Corporate Governance Principles and Recommendations (CGPR) released by the Australian Securities Exchange (ASX) Corporate Governance Council (2009) and management contracting, this study presents evidence in an Australian context that both board monitoring and management contacting influence the extent of earnings management individually and collectively. Using a sample of 138 ASX listed companies, this study finds that discretionary accruals have shown various patterns across a range of observation periods. A higher incidence of CEO duality is significantly related to lower levels of earnings management. The independence of the boards is associated with higher levels of earnings management. The results show that managerial ownership has a positive effect on discretionary accruals. Furthermore, the impact of managerial ownership outweighs the impact of board monitoring on returned earnings, particularly on the reporting of income-increasing accruals. It is observed that the strategic shareholdings of senior management have more impact on earnings than short-term incentives. This demonstrates that long-term managerial ownership is a more effective way of aligning the interests of mangers with those of shareholders than short-term compensation such as bonus plan.