The role of intellectual capital as a mediation of relationship between audit committee and real earnings management

Sri Layla Wahyu Istanti,Anis Chariri,Agung Juliarto

doi:10.5267/j.ac.2021.4.008

Abstract

This study aims to examine the role of human capital, which is part of intellectual capital, as a mediator in the relationship between audit committee expertise and the number of audit committee meetings with real earnings management. This research is a quantitative study. The data source used is data from manufacturing companies in Indonesia. The sample selection technique used purposive sampling. The analysis technique uses path analysis. The results showed that the expertise of the audit committee had a significant effect on human capital, while the number of audit meetings had no effect on human capital. The results of this study also state that audit committee expertise, number of audit committee meetings and human capital performance have no effect on real earnings management actions. Furthermore, there is empirical evidence that shows that human capital has a mediating effect on the relationship between audit committee expertise and the number of audit committee meetings with real earnings management. The role of human capital in the relationship between the expertise of the audit committee and the number of audit committee meetings becomes originality, so it is the main contribution of research. The limitation of this research is that it only uses human capital as a mediating variable.

Highlights

The main objective of this study is to examine the effect of human capital mediation on the relationship between audit committee expertise and the number of audit meetings on real earnings management
This study aims to examine the role of human capital, which is part of intellectual capital, as a mediator in the relationship between audit committee expertise and the number of audit committee meetings with real earnings management
It can be explained that the hypothesis which states that audit committee expertise has a significant positive effect on human capital is accepted

Summary

Introduction

The main objective of this study is to examine the effect of human capital mediation on the relationship between audit committee expertise and the number of audit meetings on real earnings management. Shareholders see the performance of the financial statements from the achievement of company profits from year to year. Roychowdhury (2006) states that Real Earnings Management is a motivation from management to provide a wrong understanding of stakeholders by deviating from the company's normal operating activities. Gunny (2010)states that earnings management practices, both accrual and real, are thought to affect the quality, reliability and value relevance of financial statements. The opportunistic actions of management in doing practice are the impact of the agency relationship conflict. Agency theory is a basic concept in corporate governance which is expected to function to reduce the manipulation of earnings by managers so that the reported performance reflects the actual economic condition of the company (Devi & Iskak, 2018)

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Conclusion