Abstract
In the preparation of accrual basis accounting financial statements are selected because it can reflect the company's financial condition directly. Policymakers provide flexibility for management to be able to choose the accounting standards applied to the company. Management takes advantage of the freedom of selection of certain accounting policies in order to provide good earnings reporting in the financial statements. This study aims to analyze the effect of firm size and good corporate governance (GCG) to earnings management with moderation variables that is audit quality. This research is a quantitative research using secondary data. The sample selection was done by purposive sampling method and the data processing method using hypothesis analysis and multigroup analysis. The data used is obtained from Indonesia Stock Exchange and processed by using Smart PLS. The results showed that firm size variables did not significantly influence positively to earnings management but the variable of Good Corporate Governance (GCG) had a significant positive effect on earnings management. Audit quality can not moderate the effect of firm size on earnings management. The researchers hope that the results of this study will provide new insights for academics and practitioners regarding the relationship between Corporate Size, Good Corporate Governance (GCG) and Audit Quality to Profit Management.
Highlights
Profit is the company's main goal in undergoing operations that take place in each period
Researchers are interested to examine whether firm size is influential in implementing earnings management practices and researchers are interested in examining whether good corporate governance (GCG) affects earnings management practices Where the use of audit quality variables as moderating variables is based on the role of the auditor as an independent party in giving opinion on reports Finance
The reasons that support the results of this study is that each company can make earnings management, because by applying earnings management companies can maximize profits so it can be concluded that to apply earnings management does not have to be based on the size perusahaan.Hasil research is in line with research AT Marjani (2013) Stated that firm size has no positive effect on earnings management
Summary
Profit is the company's main goal in undergoing operations that take place in each period. Management will take advantage of the freedom of selection of certain accounting policies in order to provide good earnings reporting in the financial statements. This allows management to perform accounting practices with profit-oriented numbers that will result in low quality reported earnings resulting in errors in decision making (Barus & Setiawati, 2015). The low quality of this information served by the management is due to the practice of earnings management as the impact of agency problems. Based on the background of the research described earlier, in this study formulated problems in the research questions as follows: LITERATURE REVIEW AND HYPOTHESIS
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