Government Accrual-Based Accounting Standards Implementation in Indonesia: The Role of Local Government Internal Audit

Abstract

This study aims at investigating the effect of local government internal audit characteristics on government accrual-based accounting standards (SAP) implementation in local government in Indonesia, as represented by the level of non-compliance with SAP of local government audited financial statement. Indonesian local governments with accrual accounting standards non-compliance findings during 2015-2018 are analyzed with OLS regression, equipped with sensitivity analysis to test the robustness of the research model. This research presents empirical evidence that the capability, maturity, and size of local government internal audit plays a role in lowering non-compliance with accrual-based SAP. Sensitivity analysis reveals that the effects remain consistent for all variables. The limitation of this study is that local governments with adverse and disclaimer audit opinions are not employed as samples due to data availability, in which there is a possibility for more issues in implementing accrual-based SAP. This study brings implications for local governments in Indonesia and the State Development Audit Agency (BPKP) to be able to improve local government internal audit function capability and maturity and human resource availability through various supporting policies.