Abstract
In this study, we aim to examine the influence of corporate governance on the audit quality of financial report moderated by benevolence. The research data consisted of 320 observations from 80 public listed companies in the manufacturing industry from 2013-2016. The research model has been tested using a data pool, with statistics on Structural Equalization Modeling - Partial Least Square (SEM-PLS). The results of the study get empirical evidence that corporate governance has a positive effect on audit quality. While benevolence as an independent variable has a negative impact on audit quality, however, benevolence as a moderating variable strengthens the influence of corporate governance on audit quality. Likewise, SIZE as control variables have a positive effect on audit quality, but ROA no impact on audit quality and LEV have a negative impact on audit quality. The result of this study have implications for investors, company management and regulators, that good corporate governance is inseparable from the benevolence of management in managing the company as a way to improve audit quality, is something essential and needs attention from all parties.
Highlights
The number of companies that fail is not just because of competition, but because poor of corporate governance practices and audit quality, corporate governance and audit quality are essential for benevolence if we want to ensure business sustainability is maintained
As presented in Table no. 3, the results show that Corporate Governance (CG) as defined by effectiveness of boards, accountability of external and risk, remuneration and reward, shareholder relation and stakeholder relation (EARSS) has positive impact on Audit Quality (AQ) as defined by audit fee, auditor industrial specialist, auditor size and audit tenure (FISST) indicated by the p-value 0,000
This study empirically examines the corporate governance influence through six dimensions, i.e. effectiveness of boards, accountability of external and risk, remuneration and rewards, shareholder relations and stakeholder relations (EARSS) on audit quality attribute by audit fees, auditor industrial specialist, auditor size and audit tenure (FISST)
Summary
The number of companies that fail is not just because of competition, but because poor of corporate governance practices and audit quality, corporate governance and audit quality are essential for benevolence if we want to ensure business sustainability is maintained. Because corporate governance and good audit quality are crucial factors in the sustainability of the company's operations and maintaining trust from the investor community. Rahman & Bremer (2016) states that good corporate governance will produce accurate and trusted financial reports, while bad governance usually followed by the practice of corporate scandals, fraud and fraud that will deliver financial reports which are inaccurate and potentially can cause loss of trust in financial statements. Because according to Imhoff Jr (2003), financial reports that have integrity and trustworthiness cannot be separated and are always closely related to corporate governance and auditing
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