Abstract
The quality of earnings indicates the current or future capability of the company to support the decisions made by managing board and other stakeholders. This research have to goal to examine the determinant of earnings quality in Indonesia, including: IFRS convergence, accounting disclosures, and audit committees. Data were acquired from official website in period of 2016-2018 and number of data was 212 observation data. Method of analysis involved regression test and classical assumption test. Result of research showed that the audit committee had a positive effect on earnings quality, while the convergence of IFRS and accounting disclosure cannot affect earnings quality. Research model was tested using control variables, respectively leverage, liquidity and company size. The test found that leverage is the only control variable that affects earnings quality. Information in financial statements is not the most important information to investors. Audit committee and creditor contribution play more important role in decisions regarding earnings quality.
Highlights
Financial statements represent a meaningful source of information used by stakeholders to understand the actual condition of the firm
The formula of the test is written in the following equation: Earnings Quality = β0 + β1 International Financial Reporting Standards (IFRS) + β2 Accounting Disclosure + β3 Audit Committee + β4 Leverage + β5 Liquidity + β6 Company Size + ei Classic assumption test is conducted to know whether regression estimation is free from normality, heteroscedasticity, multicollinearity and autocorrelation symptoms
Earnings quality derives from compliance with IFRS convergence. This position is in line with previous studies, including Kusumaningwedari & Oktorina (2017), Kristanto et al (2014), and Houqe et al (2011), which the findings generally showed that IFRS convergence does not effect on quality of earnings
Summary
Financial statements represent a meaningful source of information used by stakeholders to understand the actual condition of the firm. Earnings quality itself is affected by several factors, such as IFRS convergence (Almaharmeh & Masa’deh, 2018; Sutrisno & Djashan, 2017), accounting disclosure (Suryanto, 2016; Febrina & Suaryana, 2011), and audit committee (Darabali & Saitri, 2016; Suryanto, 2016; Silfi, 2016; and Simamora, Tanjung, & Julita, 2014). Sutrisno & Djashan (2017) said that IFRS convergence in Indonesia minimizes the capability of managing board to commit fraud and helps to ensure that information presented in financial statements is in better quality. Based on several inconsistent findings of previous studies regarding the factors that influence earnings quality, this research is intended to empirically examine the determinant of earnings quality in Indonesia. These factors include IFRS convergence, accounting disclosures, and audit committees
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