Analysis of effects of Earnings Management on Corporate Social Responsibility Disclosures and role of Audit Quality on the IDX

Abstract

This study aims to examine and analyze empirically the effect of earnings management on Corporate Social Responsibility disclosure and the role of audit quality as proxied by the size of the accounting firm and auditor industry specialization in moderating the relations between earnings management and CSR disclosure. This study uses secondary data with samples of 69 manufacturing companies in the basic industry and chemical sectors listed on the Indonesia Stock Exchange from 2017 to 2019 which were obtained using purposive sampling method. The independent variable in this study is earnings management with Discretionary Accruals as proxy which measured using Modified Jones Model. While the dependent variable in this study is the disclosure of Corporate Social Responsibility, which is proxied by CSR disclosure index (CSRI) measured based on indicators of GRI-G4 disclosure. The moderating variable in this study, there is audit quality as proxied by the size of the accounting firm and auditor industry specialization which is measured using dummy variables, the value of 1 is for The Big Four KAP and auditor industry specialization, while the value of 0 is for Non The Big Four KAP and unspecialized industry auditors. The analysis of data in this study is using a simple linear regression model and Moderated Regression Analysis (MRA) to decide the hypothesis. The value of 1 is for The Big Four KAP and auditor industry specialization, while the value of 0 is for Non The Big Four KAP and unspecialized industry auditors. The analysis of data in this study is using a simple linear regression model and Moderated Regression Analysis (MRA) to decide the hypothesis. The value of 1 is for The Big Four KAP and auditor industry specialization, while the value of 0 is for Non the Big Four KAP and unspecialized industry auditors. The analysis of data in this study is using a simple linear regression model and Moderated Regression Analysis (MRA) to decide the hypothesis. The results of this study reveal that earnings management has a positive and significant effect on Corporate Social Responsibility (CSR) disclosure and the size of the accounting firm (KAP) variable can be a moderating in the relations between earnings management and CSR disclosure. Meanwhile, the auditor industry specialist variable can't moderate the relations between earnings management and CSR disclosure.