Supervision of Independent Commissioners and Audit Committee on Earnings Management Practices

Eka Noor Asmara,H Herbowo,S Supardi,Yudi Santara Setyapurnama

doi:10.33096/atestasi.v4i2.624

Abstract

This paper describes the research which investigates the relationship of corporate social responsibility (CSR) disclosure and earnings management (EM) practices in banking companies listed on the Indonesia Stock Exchange for the fiscal year ending 31 December 2015 to 2017. EM used in this study is the different between discretionary realized security gain or loss (RSGL) and discretionary loan loss provition (LLP) from the Grougiou et.al., (2014) research model. Data is obtained by purposive sampling process and both from the IDX and from the websites of each bank. The research hypothesis was tested using ordinary least square .The results showed that CSR does not affect on EM. The results also show that independent commissioner has a significant negative effect on EM and audit committe does not affect EM. This research is expected to contribute to the existing literature by completing and enriching findings the effect of independent commissioner on the earnings management practices.

Highlights

Financial reports are the primary tool for conveying financial information as a manager's responsibility (Hasanuddin et al, 2021)
This study examines the supervision of independent commissioners, audit committees, and Control Social Responsibility (CSR) disclosures on Earning Management (EM) practices in banking companies listed on the Indonesia Stock Exchange for the financial year ending December 31, 2015, to 2017. used in this study is the difference between discretionary Realized Security Gain or Loss (RSGL) and discretionary Loan Loss Provision (LLP)
Earnings management obtained from the difference between discretionary RSGL and discretionary LLP has a mean value of 1.141, indicating that the practice of earnings management carried out by banks in Indonesia is still relatively small

Summary

Introduction

Financial reports are the primary tool for conveying financial information as a manager's responsibility (Hasanuddin et al, 2021). The information submitted in the financial statements should show all activities and be disclosed in the annual financial statements, including corporate social responsibility (CSR) activities. By disclosing CSR activities in the annual report, the company will be considered an entity that cares about social and environmental issues by stakeholders and shareholders (Filemon & Krisnawati, 2014). The practices carried out by managers to provide benefits to specific parties by manipulating information in financial statements, commonly called earnings management, aim always to make a positive response to financial statements in the eyes of investors and those who need information. By carrying out extensive earnings management practices, the financial statements produced by the company no longer provide accurate company information (Chih et al, 2008)

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Conclusion