Governance Audit Research Articles

Pengaruh Motivasi Auditor dan Kompleksitas Tugas terhadap Kinerja Auditor Pemerintah Daerah: Studi pada Inspektorat Aceh

This study aims to analyze the influence of auditor motivation and task complexity on the performance of government auditors. Auditor motivation is considered a crucial factor that can drive work efficiency and effectiveness, while task complexity contributes to determining an auditor's ability to optimally complete their tasks. This research was conducted on employees of the Aceh Inspectorate, encompassing 82 individuals from various positions, including Inspectors, Secretaries, Assistant Inspectors, functional auditor officials, and other staff. The study employed a quantitative approach with a census method, where the entire population was used as the research sample. To test the hypotheses, Structural Equation Modeling (SEM) was utilized, allowing simultaneous and in-depth analysis of variable relationships. SEM was chosen for its ability to test causal relationships and provide accurate estimations regarding the influence of variables in the study. The findings indicate that auditor motivation has a direct and significant effect on auditor performance, with a greater contribution than task complexity. High motivation has been proven to enhance the efficiency and effectiveness of auditors' work. Task complexity also has a significant impact, though its contribution is moderate (value of 0.417). However, the study also revealed that other factors, such as integrity, professionalism, and auditor independence, influence auditor performance, even though they were not the primary focus of the research. This study emphasizes the importance of enhancing auditor motivation and managing task complexity, as well as integrating other factors into further analyses to provide a holistic understanding of the factors affecting the performance of government auditors.

Does Improving Government Auditing Independence Promote Public Environmental Concern? Evidence from Auditing Vertical Management Reform in China

Does Improving Government Auditing Independence Promote Public Environmental Concern? Evidence from Auditing Vertical Management Reform in China

Mitigating Village Fund Fraud in Indonesia: The Role of Leadership, Transparency, and Community Engagement – Study in Central Bengkulu Regency

Village fund management in Indonesia is crucial for rural development and poverty reduction. However, it is susceptible to fraud, hindering progress and eroding public trust. This study investigates the influence of leadership commitment, external supervision, reporting transparency, and community participation on fraud prevention in village fund management in Central Bengkulu Regency. A quantitative approach was employed, utilizing a survey method with 102 respondents, including village officials, government auditors, and related stakeholders. Data analysis was conducted using multiple linear regression to examine the relationship between the independent variables (leadership commitment, external supervision, reporting transparency, and community participation) and the dependent variable (fraud prevention). The findings demonstrate that leadership commitment, external supervision, reporting transparency, and community participation have a significant positive effect on fraud prevention in village fund management. Leadership commitment fosters an accountable organizational culture, while external supervision strengthens control mechanisms. Reporting transparency enhances public scrutiny, and community participation creates effective social control to minimize potential budget irregularities. In conclusion, This study recommends strengthening human resource capacity through training and education, increasing technology-based transparency for better information access, and promoting wider community involvement in the planning, implementation, and supervision of village funds. These measures collectively contribute to a more robust and fraud-resistant village fund management system.

Mitigating Village Fund Fraud in Indonesia: The Role of Leadership, Transparency, and Community Engagement – Study in Central Bengkulu Regency

Village fund management in Indonesia is crucial for rural development and poverty reduction. However, it is susceptible to fraud, hindering progress and eroding public trust. This study investigates the influence of leadership commitment, external supervision, reporting transparency, and community participation on fraud prevention in village fund management in Central Bengkulu Regency. A quantitative approach was employed, utilizing a survey method with 102 respondents, including village officials, government auditors, and related stakeholders. Data analysis was conducted using multiple linear regression to examine the relationship between the independent variables (leadership commitment, external supervision, reporting transparency, and community participation) and the dependent variable (fraud prevention). The findings demonstrate that leadership commitment, external supervision, reporting transparency, and community participation have a significant positive effect on fraud prevention in village fund management. Leadership commitment fosters an accountable organizational culture, while external supervision strengthens control mechanisms. Reporting transparency enhances public scrutiny, and community participation creates effective social control to minimize potential budget irregularities. In conclusion, This study recommends strengthening human resource capacity through training and education, increasing technology-based transparency for better information access, and promoting wider community involvement in the planning, implementation, and supervision of village funds. These measures collectively contribute to a more robust and fraud-resistant village fund management system.

The Effect of Institutional Pressure on the Level of BPK Auditor Reliance: A Study of Government Audit Institutions in Indonesia

Supreme Audit Agency (BPK) and Government Internal Supervisory Apparatus (APIP), as government audit institutions, have an essential role in realizing the accountability of state financial management. Both are expected to establish good coordination because it can benefit both the audit institution and the government organization being audited. This study examines the effect of institutional pressure, namely coercive pressure, normative pressure and mimetic pressure, on the level of BPK auditor reliability. In addition, this study also aims to examine the impact of BPK auditor reliability on audit quality. The research was conducted at government audit institutions considering that reliability is a form of coordination in conducting government financial report audits. The survey method was carried out to collect data from 264 audit team leaders tasked with examining the government’s 2020 financial reports. SEM PLS analysis was used with the help of the WarpPLS Version 8 software. Unlike previous studies, this study found that mimetic pressure does not affect the level of auditor reliability. BPK is the only external government audit institution so no other audit institutions can be used as a benchmark in auditing government financial reports. The study also concluded that BPK auditors’ reliance on APIP could improve audit quality. This research provides input for the government regarding strategies to improve coordination and cooperation between BPK as the government’s external auditor and APIP as the government’s internal auditor.

NAVIGATING AUDIT COSTS: THE INTERPLAY OF MEKANISME CORPORATE GOVERNANCE, EXECUTIVE COMPENSATION, AUDIT RISK, AND FAIR VALUE

Objective: The purpose of this study is to critically examine and test the factors that determine audit fees, with a particular focus on the roles of corporate governance mechanisms, executive compensation, audit risk, and the fair value of non-current assets. By analyzing these factors, the study aims to provide deeper insights into the complex drivers of audit pricing and contribute to the ongoing discourse on audit quality and financial transparency. Theoretical Framework: Agency theory emphasizes the conflicts of interest between principals (investors) and agents (management) arising from information asymmetry, which results in audit fees that confirm the accuracy of financial statements. Additionally, corporate governance mechanisms, executive compensation, audit risk, and fair value influence this dynamic. Method: This study investigates manufacturing companies in the consumer goods sub-sector listed on the Indonesia Stock Exchange from 2018 to 2022. A purposive sampling method was used to select 42 companies each year, totaling 210 annual reports obtained from the IDX website and the companies' websites. Results and Discussion: The research findings show that a higher number of independent commissioners, a higher number of audit committees, higher executive compensation, and the use of fair value of non-current assets can increase the cost of an external audit. However, this study has yet to be able to prove that managerial ownership and audit risk can affect audit fees. Research Implications: This research offers insights for auditors, management, and regulators. Auditors should align fees with audit quality, factoring in business complexity and risk. Reasonable fees reflect management's investment in internal controls, enhancing financial statement credibility. Regulators must ensure fees support high-quality audits to prevent failures. Originality/Value: This study contributes to the literature by highlighting how corporate governance factors independent commissioners, audit committees, executive compensation, and fair value of non-current assets impact audit fees. It emphasizes their role in enhancing audit quality and offers valuable insights for auditors, management, and regulators in justifying audit fee structures.

Analysis of Professional Skepticism and APIP Competence on Audit Quality (A Study at the Inspectorate of Southwest Aceh Regency)

This study aims to analyze the influence of professional skepticism and the competence of APIP (Internal Government Auditors) on audit quality at the Inspectorate of Southwest Aceh Regency, using a Likert scale. The research is motivated by studies highlighting the impact of audits on government losses caused by the development of the Integrated Information System of the Abdya Creative Industry Center (PIKA). The population of this study consists of all staff at the Inspectorate Office of Southwest Aceh Regency, totaling 49 individuals, with a purposive sampling technique and a sample size of 31 auditors involved in field audits and evidence documentation. The results of the study show that professional skepticism does not have a significant impact on audit quality, while APIP competence has a positive and significant impact on audit quality. These findings provide important insights for the Inspectorate of Southwest Aceh Regency to focus more on improving auditor competence to enhance audit quality outcomes.

Intellectual capital mediates good corporate governance and internal audit on the quality of financial reports PT. Akebono Brake Astra, Indonesia

This study aims to determine and analyze the influence of good corporate governance, internal audit on the quality of financial reports directly and indirectly through intellectual capital. The research was conducted at PT. Akebono Brake Astra Indonesia, with a sample size of 60 respondents. The method used in the sampling process is random sampling. The analysis model uses path analysis and descriptive analysis. The study's findings indicate that: 1) good corporate governance has a positive and significant impact on intellectual capital; 2) internal audit has a positive and significant impact on intellectual capital; 3) good corporate governance has a positive and significant impact on the quality of financial reports; 4) internal audit has a positive and significant impact on the quality of financial reports; 5) intellectual capital has a positive and significant impact on report quality; 6) there is no positive and significant impact of good corporate governance on report quality through intellectual capital; and 7) there is not a positive and significant influence of internal audit on report quality through intellectual capital. The company's management adheres to the principle of prudence and compliance with the articles of association and company regulations, thus fulfilling social responsibility through a commitment to community welfare and environmental sustainability, especially around the company. The company presents financial report information that can be compared with other reporting entities and with previous financial reports, thus facilitating internal and external comparisons.

Good Corporate Governance and Internal Audit on Financial Performance with Firm Size as a Moderating Variable in Financial Sector Companies on the Indonesia Stock Exchange, 2020-2023

This study aims to analyze the effect of Good Corporate Governance (GCG) and Internal Audit on financial performance, with Firm Size as a moderating variable, in financial sector companies listed on the Indonesia Stock Exchange for the 2020-2023 period. The research adopts a quantitative approach using secondary data, analyzed through Smart PLS 3. The results indicate that the Good Corporate Governance (GCG) variable has a significant effect on financial performance, and Internal Audit also significantly impacts financial performance. However, Firm Size does not influence financial performance. Additionally, the findings reveal that Firm Size does not moderate the relationship between Good Corporate Governance (GCG) and financial performance, nor between Internal Audit and financial performance. This study concludes that Good Corporate Governance (GCG) and Internal Audit individually affect financial performance, but Firm Size does not play a moderating role in these relationships.

Corporate Governance Mechanisms and Audit Feature: Evidence from an Emerging Stock Market

This study investigates whether audit fees are impacted by board diversity and ownership structure. Specifically, the purpose of this study is to investigate the correlation between board diversity through the board of directors’ composition which includes the size of the board, the composition of independent members, multiple directorships of the board, board gender diversity, and CEO tenure) —as well as ownership construction which includes Ownership concentration, foreign concentration, and intuitional concentration) and audit features namely, audit fees. Secondary data, which is intended to be gathered from the annual reports of Jordanian enterprises as financial and auditing data, has been used to address this. The control variables are client size, leverage, business complexity, sales internationally, and asset return. The study relationships are tested by using OLS regression. This study also seeks to inspect whether gender diversity on the board influences audit fees. The findings illustrate that some aspects of governance mechanisms influence audit fees This research implies that there is a strong positive correlation between audit fees and ownership concentration, which further supports the notion that financial reporting is reliable. The results indicated a depressing relationship between independent directors' audit fees and the duration of CEOs. Additionally, the findings demonstrated that board size hurt audit fees. The board of directors (many directorships) had a statistically significant impact on the audit fees, according to the results. The results of this study suggest that a key factor in determining audit fees and audit quality is board diversity and ownership structure.

Determinant Of Fraud Prevention In Regional Financial And Asset Management: Moderation Of Internal Audit

This research aims to find empirical evidence of the influence of the internal control system, auditor competence, and organizational culture on fraud prevention, with internal audit as a moderating variable. This study applied a quantitative method and a causally associative approach. Employees at the Financial and Asset Management Agency of Kupang Regency and City Government were population in this study 91 civil servants. The sample was chosen using purposive sampling, and the research sample was 75 respondents. Data collection uses survey techniques by distributing questionnaires to be filled out by employees. Partial least squares-structural equation modelling (PLS-SEM) is used in the data analysis with SmartPLS version 3.29. The result of this study indicates that internal control systems, auditor competence, and organizational culture positively affect fraud prevention. Internal audits do not affect fraud prevention. Internal audit can moderate the effect of internal system control and auditor competence. Internal audits cannot moderate the relationship between organizational culture and fraud prevention. This research can contribute to advancing current theory and be a reference for further research, especially on fraud risk. This research can be a reference for audit institutions in advancing best practices to improve the effectiveness of government audits in reducing and preventing fraud.

Analisys of Fraud Diamond Theory in Detecting Fraudulent Financial Statement: Study in Manufacturing Company in Indonesia

This study aims to analyze the application of the Fraud Diamond Theory in detecting fraudulent financial statements in manufacturing companies in Indonesia. The Fraud Diamond Theory, which consists of four key elements—pressure, opportunity, rationalization, and capability—provides a comprehensive framework for understanding the factors that drive individuals to commit financial fraud. Using a sample of financial data from selected manufacturing firms, this research examines how these four elements contribute to fraudulent behavior and evaluates their effectiveness in identifying financial statement irregularities. The study utilizes quantitative methods, employing financial ratio analysis, statistical tests, and data on corporate governance to assess the likelihood of fraud within these companies. The results indicate that the elements of pressure and opportunity play a significant role in facilitating fraudulent activities, while rationalization and capability also contribute but are more difficult to quantify. The findings suggest that incorporating Fraud Diamond indicators into corporate governance and internal audit systems can enhance the early detection of financial fraud in manufacturing firms in Indonesia. This research contributes to the growing body of literature on fraud detection, offering insights for regulators, auditors, and corporate stakeholders to strengthen financial oversight and prevent financial misstatements.

Pengaruh Corporate Governance dan Intellectual Capital terhadap Nilai Perusahaan

This research aims to examine the influence of corporate governance (board direction, managerial ownership, institutional ownership, and audit committee) and intellectual capital on company value. Company value is measured using Tobin's Q. This research uses secondary data. The sampling technique used was purposive sampling, with a sample of 43 manufacturing companies listed on the Indonesia Stock Exchange in 2020-2022. The analytical method used is multiple regression analysis. Based on regression analysis, the results of this research show that board direction has an insignificant positive effect on company value. Managerial ownership has a significant negative effect on firm value. Institutional ownership has a significant negative effect on firm value. The audit committee has an insignificant negative effect on company value and intellectual capital has an insignificant negative effect on company value.

Analysis of Factors Affecting Local Government Financial Performance

The financial performance of local governments (LG) in implementing regional autonomy has a central role. However, the phenomenon is that only some local governments have this financial capability. Therefore, this study examines what factors can affect financial performance. This study empirically analyzed the effect of capital expenditure, local government size, legislative size, local revenue, and audit opinion on the financial performance of local governments in districts and cities in West Java. The method used uses quantitative methods. The research data used financial reports of Regency and City Regional Governments in West Java for the period 2015 - 2022 using Purposive Sampling. A total of 216 data were analyzed using Multiple Linear Regression. The steps in this study begin with a review of literature and regulations, data collection, data tabulation, data analysis, and then reporting and publication of research results. The results showed that the size of local government, local revenue, and audit opinion had a positive effect on financial performance, while capital expenditure and legislative size did not affect financial performance. Based on the results of this study, the implication is that district and city governments in West Java must increase the size of local governments, local revenue, and audit opinion to improve their regions' financial performance. Keywords: Performance, capital expenditure, local government size, PAD, legislative size, audit opinion.

The emergence of artificial intelligence ethics auditing

The emerging ecosystem of artificial intelligence (AI) ethics and governance auditing has grown rapidly in recent years in anticipation of impending regulatory efforts that encourage both internal and external auditing. Yet, there is limited understanding of this evolving landscape. We conduct an interview-based study of 34 individuals in the AI ethics auditing ecosystem across seven countries to examine the motivations, key auditing activities, and challenges associated with AI ethics auditing in the private sector. We find that AI ethics audits follow financial auditing stages, but tend to lack robust stakeholder involvement, measurement of success, and external reporting. Audits are hyper-focused on technically oriented AI ethics principles of bias, privacy, and explainability, to the exclusion of other principles and socio-technical approaches, reflecting a regulatory emphasis on technical risk management. Auditors face challenges, including competing demands across interdisciplinary functions, firm resource and staffing constraints, lack of technical and data infrastructure to enable auditing, and significant ambiguity in interpreting regulations and standards given limited (or absent) best practices and tractable regulatory guidance. Despite these roadblocks, AI ethics and governance auditors are playing a critical role in the early ecosystem: building auditing frameworks, interpreting regulations, curating practices, and sharing learnings with auditees, regulators, and other stakeholders.

APIP's Role in SPIP to Support Defense Force Development

Law No. 1 of 2004 mandates accountable and transparent management of state finances in Indonesia. To ensure compliance, efficiency, and good governance, the effective implementation of APIP (Aparat Pengawasan Intern Pemerintah or Internal Government Auditors) is crucial. Enhancing the role of APIP is necessary to address the low quality of state financial management, ensure accountability, and support bureaucratic reform for transparent and efficient governance. Purpose: This study aims to analyze the role of APIP within the SPIP (Sistem Pengendalian Intern Pemerintah or Government Internal Control System) framework to support the development of Indonesia's defense forces. The research employs a qualitative descriptive method to explore the role and impact of APIP in state financial management and defense force development. Results: The study reveals a significant improvement in the capabilities of APIP over recent years. In 2015, 85.23% of APIP units were only at capability level 1, which indicates basic operations without full adherence to professional standards. By 2022, 54.74% of APIP units had reached capability levels above 3, indicating compliance with professional standards, enhanced risk management, and improved organizational governance. This increase in capability supports more robust oversight, particularly in the Ministry of Defense and the Indonesian Armed Forces, where APIP plays a vital role in overseeing budget management, the modernization of defense equipment, and the improvement of human resources. Conclusion: While the improvement in APIP capabilities enhances effectiveness, the assessment of efficiency in state financial management remains underemphasized. Addressing this gap is essential for the country's financial reforms aimed at improving public services and ensuring fiscal sustainability. APIP not only maintains integrity, transparency, and accountability but also supports the development of defense forces through comprehensive financial, management, and social audits. The focus on both efficiency and effectiveness is critical to strengthening the relevance of these findings in achieving sustainable governance and defense objectives.

Public auditors’ perception of digital platforms for popular reporting: insights from the case study of OpenBDAP

PurposeThis paper employs the Biondi and Lapsley (2014) accounting information transparency model to investigate whether effective transparency can be achieved through digital platforms for popular reporting. In order to address the limitations in previous research, which predominantly targets non-expert users, this is attained by focusing on the perception of local government auditors. By engaging auditors who are experts in accounting, the study aims to investigate if any cognitive biases in the design of online platforms could impact the achievement of a sophisticated understanding with shared meanings among citizens.Design/methodology/approachThe study adopts an explorative and inductive approach, semi-structured interviews and an online survey among the Italian local governments’ Professional Auditors’ Association (ANCREL). Auditors assessed the OpenBDAP (https://openbdap.rgs.mef.gov.it/) platform in facilitating the comparison and analysis of the budgets and financial statements of Italian public sector organisations.FindingsThe results present a nuanced assessment of OpenBDAP, highlighting a general consensus on its ability to enhance the access and understanding of financial data and the appreciation of the utility of infographics in understanding financial data. Therefore, a clear challenge emerges in achieving active engagement of stakeholders. Despite expectations expressed during interviews with the Italian National Accounting Office regarding the design of custom APIs to meet user needs, our findings indicate the potential presence of cognitive biases in the design of the online platform as key obstacles.Originality/valueBy extending the application of the Biondi and Lapsley (2014) model on digital platforms for popular reporting to local government auditors, this study highlights the potential presence of cognitive bias in the design of online platforms that may impact the achievement of effective transparency, an aspect not previously identified in existing research. Finally, it suggests that these popular reporting platforms may evolve beyond mere transparency tools, assuming a broader role as potent learning instruments. This transformation could help to address the inherent complexity of accounting information, which is the real obstacle to achieving transparency.

Relationship between government subsidies and audit quality: Unveiling the role of ownership structure

Relationship between government subsidies and audit quality: Unveiling the role of ownership structure

Performance-Based Budgeting and Corporate Innovation: Evidence from a Quasi-Natural Experiment in China

ABSTRACT This paper exploits a quasi-natural experiment to investigate the relationship between performance-based budgeting (PBB) and corporate innovation in China. The findings indicate a significant rise in patent applications and patents granted among firms headquartered in provinces that have adopted PPB. The increase is particularly pronounced for firms in provinces facing higher fiscal pressure and stronger government audits. The positive impact of PBB on corporate innovation is considerable for corporates with state-owned attributes and high financial constraints. The mechanisms of government fiscal transparency, research and development subsidies, and tax incentives are supported. Additional analyses indicate that the current PBB in China shows limitations in covering the governmental fund budget comprehensively. Moreover, in regions with increased government spending on science and technology, the influence of PBB on corporate innovation is significantly more pronounced. Collectively, the evidence implies that PBB can serve as a catalyst for corporate innovation.

Frontier AI developers need an internal audit function.

This article argues that frontier artificial intelligence (AI) developers need an internal audit function. First, it describes the role of internal audit in corporate governance: internal audit evaluates the adequacy and effectiveness of a company's risk management, control, and governance processes. It is organizationally independent from senior management and reports directly to the board of directors, typically its audit committee. In the Institute of Internal Auditors' Three Lines Model, internal audit serves as the third line and is responsible for providing assurance to the board, whereas the combined assurance framework highlights the need to coordinate the activities of internal and external assurance providers. Next, the article provides an overview of key governance challenges in frontier AI development: Dangerous capabilities can arise unpredictably and undetected; it is difficult to prevent a deployed model from causing harm; frontier models can proliferate rapidly; it is inherently difficult to assess frontier AI risks; and frontier AI developers do not seem to follow best practices in risk governance. Finally, the article discusses how an internal audit function could address some of these challenges: Internal audit could identify ineffective risk management practices; it could ensure that the board of directors has a more accurate understanding of the current level of risk and the adequacy of the developer's risk management practices; and it could serve as a contact point for whistleblowers. But frontier AI developers should also be aware of key limitations: Internal audit adds friction; it can be captured by senior management; and the benefits depend on the ability of individuals to identify ineffective practices. In light of rapid progress in AI research and development, frontier AI developers need to strengthen their risk governance. Instead of reinventing the wheel, they should follow existing best practices. Although this might not be sufficient, they should not skip this obvious first step.