This study aims at examining the effect of external auditor competence on the earnings management using ownership structure as a moderating variable. Using 204 observations of companies in the manufacturing industry for the period 2011-2013, this study cannot find evidence on the effect of auditor competence. However, this study provides an empirical evidence that the presence of institutional investors helps auditors provide better audit quality due to an effective control performed by the investors. This study shows that users of financial statements should be keen on using information in the financial statements; they should not only pay attention to corporate financial information but also the ownership structure.