EVALUATING THE ROLE OF INTERNAL AUDIT AND ITS RELATION TO THE QUALITY OF FINANCIAL STATEMENT

Luh Merawati,Putu Kumalasari

doi:10.21776/ub.ijabs.2020.28.3.6

Abstract

Purpose — This research aimed to obtain empirical evidence about the effect of accounting understandability, human resource competency and the role of internal audit as moderating variable on the quality of financial statement. Design/methodology/approach — This research was conducted on all financial administration officials and treasurers of local government in Bangli Regency with the primary data was obtained from questionnaires which were distributed to respondents. Sample was determined through purposive sampling. The analysis technique used was the multiple linear regression analysis. Findings — The results suggested that accounting understandability and the human resouce competency had positive effect on the quality of financial statement. Meanwhile, the relation between accounting understandibility and the quality of financial statement, the role of internal audit was not the moderating variable. Whereas, the effect of the role of internal audit was proven to moderate the relation between human resource competency and the quality of financial statement, with negative direction. Practical Implications — The financial statement of local government is a form of accountability on the use of local finances as the implementation of regional autonomy and the operational of local government to provide useful information in decision making. Originality/value — The quality of the said financial statement is determined by qualitative characteristics which are relevant, reliable, comparable and understandable, based on PP No. 71 of 2010.

Highlights

The reformation of state finances in globalization era which is marked by the establishment of the law in state finances that is stated the importance of good governance, which is based on the principle of transparency and accountability
This study aimed to obtain empirical evidence about the effect of accounting understandability, human resource competency and the role of internal audit as moderating variable on the quality of financial statement, by taking a sample of 58 people consisting of financial administration officials and treasurers in the local apparatus of the local government in Bangli Regency
The result of this study suggested that the accounting understandibility and human resource competency had positive effect on the quality of financial statement

Summary

Introduction

The reformation of state finances in globalization era which is marked by the establishment of the law in state finances that is stated the importance of good governance, which is based on the principle of transparency and accountability. The reformation of state finances includes the reformation in accounting and government financial reporting This is shown by an obligation to prepare the reports of state finances accountability in a form of government financial statement (Elsye, 2016:61). The increasing demand for trasparency should have made the government improve the quality of financial statement that contains financial informations required by various parties. Financial and managerial accountability is an important dimension in realizing the government's credibility as a party that should be held accountable on the mandate that has been given by the public (Islamiyah, et al, 2017)

Objectives

Methods

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Conclusion