Abstract
A financial statement is a crucial matter since its quality is declining. This research developed and tested a theoretical model which identified factors directly or indirectly contributing to the financial statement quality, namely audit committee and internal audit; meanwhile, external audit and corporate governance were considered as antecedent factors having impact on the report. The objective of the research is to gain insight on such factors. The objective of the research is to gain insights on factors that affect such reports. The findings showed consistent evidence supporting the theoretical model. They also showed how AC and IA simultaneously and partially impacted the quality of financial statements (QFS). AC and IA directly or indirectly affect the quality of the financial statement. They also have indirect effects through CG and EA in enhancing the quality to 77%.
Highlights
A company is subject to present a financial statement with quality as its responsibility to authorities
The variables measured in the questionnaire include audit committee, corporate governance, internal audit, and external audit towards the quality of the financial report
The R2 reported for the dependent variables of financial report quality is 0.55, 0.30 for corporate governance (CG) and 0.33 for external audit (EA)
Summary
A company is subject to present a financial statement with quality as its responsibility to authorities. According to the International Financial Reporting Standard (IFRS) [30], the quality of information guarantees innately accurate and transparent conveyance. Kimia Farma Tbk, involving financial reporting with an initial indication of manipulation [24]. The cases exhibited involvements of internal parties of the companies such as CEO, commissioners, audit committees, and internal auditors in committing accounting fraudulence. To improve the quality of financial statement, it must be implemented by internal and external parties of the company [57, 62]. The accountant as a profession plays a vital role in guaranteeing reliable financial information for the government, investors, creditors, stakeholders, staff, debtors, the society, and other parties of interest. Public accountants as external auditors who provide an evaluation of the fairness of the report are increasingly losing their credibility and independence. The condition is evident as there is an increase in lawsuits against public accountants [27]
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