Earnings Management: Evaluation of Audit Committee Activity in Indonesia (original) (raw)
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The Effect of Audit Committee Effectiveness on Earnings Management: Indonesian Evidence
2015
ABSTRACT Taufik Harris Edyna, S.E. NIM: S4312013 THE EFFECT OF AUDIT COMMITTEE EFFECTIVENESS AND AUDIT QUALITY ON EARNINGS MANAGEMENT INDONESIAN EVIDENCE The study aims to know the extent to which audit committee effectiveness and audit quality affect on earnings management in Indonesian listed manufacturing firms. Audit committee effectiveness is measured by audit committee features including competence, diligence, and independence. Audit quality is assessed by either audit firm size or industry specialization. This study utilizes the Cross-sectional Modified Jones Model since it is more likely to detect earnings management rather than other alternative models. The research uses secondary data from the Indonesia Stock Exchange and purposive sampling involving 85 manufacturing listed companies for the year 2011. Data analyses employ the descriptive statistics, multiple regression, and logistic regression to test the hypotheses. The main findings of the study show that audit committee independence is significantly negative associated with earnings management. In all models, this audit committee feature reduces earnings management consistently. In contrast, other audit committee characteristics and audit quality are less likely to undermine earnings management. In conclusion, audit committee independence is a crucial tool to minimize a likelihood of earnings management practices in Indonesian listed manufacturing firms. The results contribute more understanding regarding the effect of audit committee effectiveness and audit quality on earnings management in Indonesian manufacturing industry. The implications of the results are that government and regulators have more incentives to enhance audit quality so as to ensure financial reporting quality and in turn, improve the confidence of investors. Another implication, the findings also encourage policy makers to rule audit committee members that consist of all independent members as a response of the important roles of audit committee independence to mitigate earnings management. Keywords: audit committee effectiveness, audit quality, earnings management
Good Corporate Governance and Earnings Management in Indonesia
2021
The purpose of this study was to analyze the effect of audit quality and audit committee on earnings management. The research population is manufacturing companies indexed on the Indonesia Stock Exchange (BEI) in the 2017-2019 period. The sample selection method used was purposive sampling. From population of 180 manufacturing companies, and by selecting certain criteria, a sample of 72 manufacturing companies was obtained. Hypothesis testing is performed using multiple linear regression using statistical software SPSS Version 26. The results of this study confirm that partially, audit quality affects earnings management and audit committee also affects earnings management. Then, hypothesis testing is also carried out simultaneously, and the result is that the quality of the audit and audit committee also affects earnings management. The practical implication of this research is that the quality of the audit and the audit committee can be a reference for investors that can be used a...
ABSTRACT : This study aims to examine the effect of the proportion of independent commissioners, the effectiveness of the audit committee, the quality of internal and external auditors on earnings management. The population of this research is State-Owned Enterpriseslisted on the IDX for the period 2016-2019. The sample obtained was 13 companies using the purposive sampling method. The analysis technique used is Multiple Linear Regression. Results show that the independent variables in this study simultaneously had a negative effect on earnings management. The proportion of independent commissioners and the quality of external auditors partially have a negative effect on earnings management. The effectiveness of the audit committee, the competence, and objectivity of the internal auditors do not have a significant effect on earnings management. Independent parties can carry out more optimal supervision, so it is suggested that the company can consider the appropriate composition of the seats on the independent board of commissioners and external auditors who can carry out their duties independently. Keywords: Independent Commissioner, Audit Committee, Internal Auditor, External Auditor, Earnings Management.
The Influence of Audit Committee to Earnings Management
2016
The role of the audit committee continues to be of importance to regulators. The New York Stock Exchange (NYSE) and the National Association of Securities Dealers (NASD) co-sponsored a Blue Ribbon Committee (BRC) to make recommendations for improving the effectiveness of the audit committee. In Indonesia, the Jakarta Stock Exchange (JSX) issued a regulation in 2001. The regulation emphasize all companies (which treaded publicly) must have audit committee. On the basis of the regulation, existing audit committee is expected to be able to restrict earnings management. According to Millstein (1999), it is totally consistent that good corporate governance practice points to the audit committee as the focal point for improvement in financial statements. This study investigates whether audit committee formation can reduce earnings management. Data is collected from JSX in 2001 and 2002 for manufacturing companies. Using independent sample t-test, the result suggests that audit committee c...
Budapest International Research and Critics Institute (BIRCI-Journal): Humanities and Social Sciences, 2020
This study aims to examine the effect of managerial ownership, audit quality and audit committee on earnings management. The research was conducted at manufacturing companies in the consumer goods sector which were listed on the Indonesia Stock Exchange in 2014-2018. The sampling technique used purposive sampling technique and obtained 10 companies that became samples. Hypothesis testing is done by using multiple regression analysis. The results of this study indicate that: first, managerial ownership does not have a significant effect on earnings management. It can be seen that the t-count is smaller than the t-table (0.152 <1.678) with a significance value of 0.880> 0.05. Second, audit quality affects earnings management. It can be seen that the t-count is greater than the t-table (2.274> 1.678), with a significance value of 0.028 <0.05. Third, the audit committee has a significant effect on earnings management. It can be seen that the t-count is greater than the t-tab...
2019
This study was done to find out impacts of audit committee size, information asymmetry, operating cash flow and external audit quality on earnings management of manufacturing companies in Indonesia. Samples used were 35 of all manufacturing companies listed in the Indonesia Stock Exchange (IDX) in the period of 2011-2015. Audit committee size was determined by comparing the number of audit committee member in a company and the minimum requirement of audit committee member according to the regulation of Financial Services Authority (OJK). Information asymmetry, operating cash flow, and external audit quality were measured based on relative bid-ask spreads, total operating cash flow on the total company assets, and dummy variable of Big 4 and non-Big 4 accounting firms, respectively. The data obtained was analyzed by multiple linear regression analysis. The results indicated that independent variables simultaneously influence earnings management practice. Partially, operating cash flo...
Objective-The purpose of this research is to empirically examine how company characteristics, corporate governance and audit quality affect earnings management. Methodology/Technique-The population used for this research is manufacturing companies listed on the Indonesian Stock Exchange between 2013 and 2015. The sampling method used in this research is purposive sampling. 64 companies are examined, with 192 items of data being obtained. Findings-This research also uses statistical testing through a multiple regression. The results show that return on assets, financial leverage, free cash flow, and sales growth all have an influence on earnings management. Meanwhile, other variables such as managerial ownership, institutional ownership, board size, the presence of an audit committee, firm size, and audit quality have no significant effect on earnings management. Novelty-In this research, company characteristics are proxied with the return on assets, financial leverage, firm size, free cash flow, and sales growth, while corporate governance is proxied with managerial ownership, institutional ownership, board size, and the presence of an audit committee.
Research in World Economy
This study examines whether companies listed Indonesia Stock Exchange conduct efficient or opportunistic earning management and to investigate the effect the Independent Commissioner and the Characteristics of the Audit Committee (measured by Auditor Size, Independence, Expertise, and Activities) on it. The sample consists of 186 observations of manufacturing companies in Indonesia Stock Exchange during the 2013-2018. Using Panel Regression Fixed Effect method, we find evidence that Independent Commissioners has a significant effect on reducing Earnings Management. The Positive Accounting Theory-the efficient perspective occurs when the compensation contract and internal control system, including monitoring by the board of commissioners, will limit the common view opportunistic manager and motivate the manager to choose the right accounting policy. The effective monitoring conducted by an independent commissioner can reduce agency costs because management prioritizes the best intere...
Jurnal Bisnis dan Akuntansi
The purpose of the research is to get empirical evidence about institutional ownership, management ownership, directors’ size, audit committee, independent commissioner, leverage, profitability, firm size, auditor’s independency and auditor’s reputability on earnings management practice. This research used 53 manufacturing companies listed in Indonesia Stock Exchange and the data were collected through purposive sampling method during the research period 2009 until 2011. The result of the research showed that audit committee, independent commissioner and debt to equity ratio had influence on earnings management practice. The results of this study indicate that the audit committee and independent commissioner overseeing management in reporting of company performance through financial statements. In addition, companies that source of funding more debt than equity is more likely to make an earnings management.
Technium Social Sciences Journal, 2022
This study aims to analyze the effect of audit quality and internal control on earnings management and the role of the audit committee as moderating variable in consumer goods manufacturing companies listed on The Indonesia Stock Exchange for the period 2015 to 2019. The novelty of this study is the measurement of audit quality with a score approach that represents the competence and independence dimensions of audit quality. In addition, the measurement of internal control uses the COSO score.The purposive sampling method resulted in 165 firms-years for analysis. The analytical method used is multiple regression with moderating variables using panel data. Based on the test results, it was found that audit quality has a negative effect on earnings management. Meanwhile, internal control has no effect on earnings management. Furthermore, the results of this study also found that the audit committee was unable to moderate the effect of audit quality and internal control on earnings man...