THE ROLE OF APPARATUS COMPETENCE, INTERNAL CONTROL SYSTEM ON GOOD GOVERNANCE AND THE QUALITY OF FINANCIAL STATEMENT INFORMATION

Abstract

INTRODUCTION:Financial management of the State in Indonesia is carried out on the basis of Act No. 17 of 2003 about the finances of the State requires the form and content of reports accountability implementation The Indonesian Budget (APBN) or Regional Government Budget (APBD) compiled and presented with government accounting standards set by government regulations. The laws were implemented in assocation with Government Regulation Number 71 in 2010 about Government accounting standards Board (GASB). GASB is the accounting principles set out in drawing up financial statements to the Government. An important goal of the reform of the accounting and administration of the public sector is the accountability and transparency of financial management of the Central Government as well as the region.The finance report generated through the udit results from the Indonesian financial audit board (BPK) on local government of 'Selayar islands' district for five years, from 2009-2013, provides BPK gives no Opinion this means that there has not yet been drawn up on the basis of Government accounting standards. Based on the Indonesian financial audit board (BPK) report in 2014 for the fiscal year of 2013, it was inferred that a very weak control system is in place so that the examiner cannot give confidence that the financial statements are free from material rendering errors, due to poor financial management of the Selayar Islands that leads to loss of as much as 25 Cases or worth 10.906.10 million rupiah.The real cause behind the poor quality of financial statements is due to the improper functioning of financial governance. The Financial governance of Selayar Islands district were not executed transparently in order to generate a reasonable financial report mainly on governance of the regional cash, receivables, inventories, Fixed Assets investment, goods, shopping, social assistance expenditures and capital expenditures.The practice of Good Governance requires the Government to be operated by following certain principles of good management such as transparency, accountability, participation, justice and independence, so that the state government resources are managed properly to really accomplish much to the prosperity and progress of the people and the country. The application of the principles of good governance in the country not to be separated from the issue of accountability and transparency in the management of the finances of countries and regions (Cadbury, 1992), One of the most important functions of corporate governance is to ensure the quality of financial statement information (Cohen & Wright, 2004:87).Previous studies provide evidence that the internal control system has a positive and significant effect of the quality of financial statement information and good governance (Hayton, 2005; Daniesta, 2011; Sukmaningrum & Puji Harto, 2012; Suyono & Hariyanto, 2012; Haliah, 2013; Nuryanto & Nunuy, 2013; I Putu & Wayan, 2014; Indriasih, 2014). The difference in findings provide evidence that there is no significant effects between the internal control system on good governance and the quality of financial statement information (Hary Setiyawati, 2013; Yensi et al., 2015).Financial governance in the Selayar Islands is associated with the quality of financial reporting information which is yet to demonstrate conformity. This is evidenced by various factors such as high dependence of the financial area to the Central Government through General Allocation Fund and Special Allocation Fund low reception area resource management, No orderly fashion in the administration and logging goods/assets of the region, expenditure not in accordance with the provisions and is not supported by an adequate record-keeping followed by utilization of Assets that don't fit with its use. The result of the financial governance are less-goodlead-work participation rates are reduced, the implementation of the work rules are often ignored, no transparency in budget management, lack of response in increasing employment, discrimination among the Division of tasks, delayed work output, inefficient, as well as the low level of responsibility in improving financial performance. …