Abstract

The purpose of this research is to analyze the effect of quality of internal audit and the effectiveness of internal control system to corporate governance in finance companies. Quality of internal audit was measured by performance, competency and objectivity. The effectiveness of internal control system was measured by control environment, risk assessment, control activities, information and communication and monitoring. The last variable is good corporate governance was measured by corporate governance framework, protection of shareholders, role of stakeholders, transparency of information and roles and responsibilities of the board of commissioners and board of directors. There were 30 finance companies that become a sample in this research. This study used multiple linear regression as the method of analysis. The result of this research indicated that (1) The quality of internal audit has a positive effect on good corporate governance variable and (2) The effectiveness of internal control system has a positive effect on good corporate governance variable. The result of this research gives implication for internal parties must maintain and improve the existence of the quality of internal audit and the effectiveness of internal control system to achieve a more optimal GCG implementation in company operations. The second implication is for government is expected to be more active in monitoring the activities of finance companies, especially in terms of corporate governance.

Highlights

  • The business world recognizes the existence of the lease which can be used as an alternative financing, especially in the delivery of capital goods or equipment other supplies

  • The interpretations of the linear regression equation are: (a) The constanta value is 6.536. It means if quality of internal audit (X1) and effectiveness of the internal control system (X2) have a value of zero or constant, good corporate governance (Y) will increase of 6.536 percent, (b) Regression coefficient of quality of internal audit (X1) variable is 0.757

  • It means if there is a change of quality of internal audit by 1%, it will increase the good corporate governance (Y) by 0.757 percent, assuming the other variables remain or equal to zero, (c) Regression coefficient of effectiveness of the internal control system (X2) variable is 0.822

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Summary

Introduction

The business world recognizes the existence of the lease which can be used as an alternative financing, especially in the delivery of capital goods or equipment other supplies. Bearing the word lease, the lease is different from the tenancy as it is known by the society This lease industry already has a legal basis that is ruled by Indonesian government namely: (i) Keputusan Presiden. Based on data from Bank Indonesia (BI) latest up to August 2010, total financing of finance companies amounted to Rp 175.17 trillion This figure is 27.68% higher than the same period in 2009 amounted to Rp 137.91 trillion (Aulawi, 2010). Another reason why leasing becomes the public choice is that consumers will get the installment credit solutions with competitive financing, easy terms and fast process. With requirements that are easy to make credit flow, finance companies face the risk of bad debts

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