The role of the audit committee to increase the influence of audit quality and internal control on earnings management

Tikkos Sitanggang,Sukrisno Agoes,Titik Aryati,Bambang Pamungkas

doi:10.47577/tssj.v29i1.6051

Abstract

This study aims to analyze the effect of audit quality and internal control on earnings management and the role of the audit committee as moderating variable in consumer goods manufacturing companies listed on The Indonesia Stock Exchange for the period 2015 to 2019. The novelty of this study is the measurement of audit quality with a score approach that represents the competence and independence dimensions of audit quality. In addition, the measurement of internal control uses the COSO score.The purposive sampling method resulted in 165 firms-years for analysis. The analytical method used is multiple regression with moderating variables using panel data. Based on the test results, it was found that audit quality has a negative effect on earnings management. Meanwhile, internal control has no effect on earnings management. Furthermore, the results of this study also found that the audit committee was unable to moderate the effect of audit quality and internal control on earnings management.

Highlights

The Company’s management is accountable to stakeholders through financial reporting
The sample used in this research is manufacturing companies in the consumer goods industry sector that have gone public and their stocks have been listed on the Indonesia Stock Exchange (IDX) from 2015 to 2019
The results of this study indicate that the audit committee has no effect on the role of auditors in suppressing earnings management in the company's financial statements

Summary

Introduction

The Company’s management is accountable to stakeholders through financial reporting. This financial report is information that will be used by shareholders and potential investors to make decisions regarding future investments. This financial statement information is used by shareholders as one of the information to assess management performance. Audit aims to improve the quality of financial reports as indicated by the low level of earnings management. It can be said that a quality audit will be able to suppress the level of earnings management in the financial statements. Several previous studies have tested the effect of audit quality on earnings management, but the results of this previous study are still inconsistent because there

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