Abstract
This study aims to analyze audit quality, audit committees, institutional ownership and independent director on earnings management at manufacturing companies listed on the Indonesia Stock Exchange in 2012-2016. The sampling method use purposive sampling for 5 years so its obtained 160 observation data samples. The results in this study indicate that earnings management that occur is the type of income decreasing. Simultaneously audit quality, audit committee, institutional ownership and independent directors significantly influence on income decreasing. Partially, audit quality and independent director variables have a negative effect on income decreasing. While audit committee independence has a positive effect on income decreasing. Furthermore, audit quality, audit committees, and institutional ownership have no effect on earning management type income decreasing.
Highlights
Manufacture industry is one of rapidly-growing industry in Indonesia
Purposive sampling technique (Sugiyono, 2014) were used with several criteria, such as: (1) Manufacture company listed in Indonesia Stock Exchange (IDX) during 2012-2016; (2) Manufacture company whom published their annual report consistently during observation period of 2012-2016; (3) Manufacture company whom published their audited annual report during observation period of 2012-2016; (4) Manufacture company whom used Rupiah currency in their annual report during 2012-2016; (5) Manufacture company whom had complete data regarding earning management during 2012-2016
Audit quality variable, proxied by KAP size, has p-value amounted to 0.0010 and regression coefficient valued at -239,000,000, which means audit quality is partially influencing income decreasing earning management
Summary
Manufacture industry is one of rapidly-growing industry in Indonesia. This supported by the fact that Indonesia was one of ten major country in manufacturing industry according to International Yearbook of Industrial Statistic 2016. Indonesian manufacture industry gave high level of contribution to country’s economy, compared to other sectors (Figure 1). Manufacture industry became one of Indonesian industry that attract investor’s interest by showing capabilities to generate profit. According to Statement of Financial Accounting Concept (SFAC) No 1, profit information was the main interest to estimate management performance and accountability. Management performance appraisal encourages implementation of earning management
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