External Audit Research Articles

Issues in sustainability reporting assurance: evidence from interviews

Purpose This paper aims to examine the processes of sustainability reporting assurance (SRA) and the influence they have on shaping perception from disclosures. Given the evidence of inconsistencies and ambiguities in assurance processes, this paper examines how legitimacy is attained and maintained at different stages of SRA. Design/methodology/approach Evidence collected from 23 semi-structured interviews with assurance providers (APs), consultants, professionals and non-governmental organisations (NGOs) (non-APs) was used to conduct a thematic analysis from the perspectives of interviewees. Findings APs and non-APs are united in recognising the value of SRA, although, perspectives on transparency between the two groups differ. Experience and industry knowledge are essential to SRA delivery with non-APs preferring accounting APs. Nevertheless, non-APs are concerned about the role of companies in deciding assurance scope, as it can affect scrutiny. APs favour data accuracy (as opposed to data relevance) assurance due to team dynamics and internal review influences, with the latter also restricting assurance innovation. APs are interested in accessing better evidence and stakeholder engagement evaluations. Providing advisory services was not rejected by all APs. The perspectives of APs and non-APs demonstrate how progress in SRA has gained pragmatic legitimacy with noticeable gaps that serve to undermine attainment of moral legitimacy. Research limitations/implications SRA is a developing practice that will adopt changes as it continues to mature; some of these changes could impact findings in this research. General perspectives on SRA were sought from interviewees, this affected the ability for an in-depth focus on any of the range of interesting SRA issues that arose over the course of the research. Interviews were conducted with relevant parties in the SRA space that operate in the UK. Perspectives from parties outside the UK were not solicited. Practical implications Companies make an important decision to commission SRA. Findings in this research have highlighted specific non-APs issues of concern that can be useful in structuring operations and reporting regimes to facilitate assurance procedures. The findings will also be helpful to APs as they can direct more emphasis on stakeholder concerns towards demonstrating greater stakeholder accountability. Regulatory and standard setters can enact appropriate policies that can potentially drive the practice forward for assessment of cognitive legitimacy. Social implications The findings provide relevant account of stakeholder voices on the quality of corporate disclosures that has a direct effect on the wellbeing of communities and sustainability of societies. Collective stakeholder input on expectations can shape sustainability discourse. Originality/value This research demonstrates the applicability of financial audit quality indicators in SRA processes, extends the debate around the effectiveness of new audit fields and highlights the challenges of maintaining legitimacy with different audiences.

“Sustaining the Sustainable Sustainability”: Leveraging Digitalization and Emerging Technologies by the Auditor in Providing Assurance on Sustainability Reporting

In today's rapidly evolving world, the importance of sustainability and circularity has become more prominent than ever. Businesses and economies worldwide are recognizing the need to transition towards a circular model, where resources are used efficiently and waste is minimized. This transition necessitates changes across all sectors, including financial auditing. While the main object of financial audit is to provide an opinion on financial statements to ensure that it gives true and fair view of the accounts, the auditor will also need to assess an organization's sustainability by evaluating its environmental and social impact, resource efficiency, and circularity performance. It becomes more and more important that the financial auditor should provide a comprehensive assessment of the organization's sustainability practices, enabling stakeholders to understand its commitment to environmental responsibility, social equity, and economic resilience. Auditing sustainability reporting involves different challenges compared to those encountered in auditing financial statements. The independent audit report issued by the financial auditor on sustainability reporting plays an essential role in building confidence in the robustness of non-financial information, providing benefits such as: ensuring the credibility of ESG information presentations within the annual report; creating a positive impact on the company's reputation; strengthening the company's awareness of material ESG risks and facilitating the improvement of internal systems, processes and controls and the company's performance in the ESG area; better positioning of the company in ESG rating rankings. Hence, auditing sustainability reporting goes beyond financial metrics and includes non-financial indicators that reflect the organization's triple bottom line – people, planet, and profit. Henceforth, by expanding the scope of financial audits to incorporate sustainability metrics, audit companies can demonstrate their commitment to the circular economy and provide transparency regarding their clients’ environmental and social performance. Henceforward, auditing sustainability reporting not only enables stakeholders to make informed decisions, but also promotes accountability and incentivizes organizations to adopt circular practices. In this context, to effectively track, measure, and assess the sustainability performance of organizations, emerging technologies play a crucial role. This paper explores the role of emerging technologies in facilitating the transition of financial auditing towards a circular economy by employing a Reflexive Thematic Analysis (RTA). Analyzing the literature on the subject is the first step in the process, which is followed by a reflective study of the underlying themes and their consequences for financial auditing procedures. Several important themes emerged, highlighting the benefits, difficulties, as well as moral and social ramifications of integrating modern technology. These themes draw attention to the topic's complexity and shed light on the opportunities and difficulties that come with incorporating emerging technologies into an audit engagement on sustainability reporting.

Executive financial background, external audit quality and shadow banking in non-financial firms

The absence of formal financial services in the face of the actual economy's transition from old to new sources of energy and development modes has led to the emergence of a widespread shadow banking sector. Based on the high-order ladder theory, this paper examines the influence of executives' financial background on non-financial firms' shadow banking. The finding reveals a positive impact of executive financial backgrounds on non-financial firms' shadow banking, mainly driven by the executives' non-banking financial experiences, primarily contributing to the shadow credit chain model. Additionally, high-quality external audits discourage management from engaging in blind shadow banking activities.

Lead Independent Directors and Internal Information Environment

ABSTRACTResearch Question/IssueThis study explores the relationship between the presence of a lead independent director (LID) and firms' internal information environment. LIDs are elected independent members of the board who perform key duties for the independent directors and the board, including reviewing and approving board meeting agendas, chairing non‐executive board meetings, and acting as a liaison between the CEO and other independent directors. We hypothesize that LID presence lowers information barriers between the CEO and the rest of the board members, enabling more rapid information acquisition and integration and enhancing the internal information environment of the firm.Research Findings/InsightsUsing a sample of US publicly listed companies from 2001 to 2019, we document that LID presence on the board is positively associated with proxies of internal information quality that reflect better information acquisition and information integration: accuracy and precision of management earnings forecasts, speed of earnings announcement, and absence of material weaknesses in internal controls. These results are robust to alternative model specifications, including entropy balancing, Heckman two‐step correction for self‐selection bias, firm fixed effects, and placebo tests. Further analyses suggest that LIDs with financial expertise and audit committee memberships are more effective in positively influencing internal information quality. We also show that LID presence is positively associated with several proxies of external information quality.Theoretical/Academic ImplicationsWe build on agency theory to argue that LIDs improve internal information quality by reinforcing the information quality benefits of unified leadership while mitigating potential compromises in information quality arising from entrenchment. Similarly, we use arguments emanating from the novel strategic leadership systems theory to posit that a LID appointment facilitates the tasks of the CEO and the board, enhancing the effectiveness of both groups in their respective roles: the CEO in making operating and investment decisions and the board in strengthening oversight while bringing cohesion in their shared role of strategy visioning and implementation.Practitioner/Policy ImplicationsOur findings suggest that there is scope for shareholders to consider LID appointments as an addition to their firms' corporate governance structures to enhance the internal information environment and decision‐making efficiency. Policymakers can also encourage LID appointments on the board when promoting best practices in corporate governance through regulatory guidelines.

The credibility of external audits of management systems – the audited enterprises’ perspective

PurposeThis paper deals with external audits, which are now commonly used in many industries (e.g. food, automotive and electrical). This study aims to assess whether a given organization meets the specific criteria. If the audit ends with a positive result, information about it is provided to selected interested parties, e.g. clients or contractors. Credibility is pivotal in adding value for all interested parties within the audit processes. This study seeks the factors which, in the opinion of the audited enterprises, have the most decisive impact on the credibility of external audits.Design/methodology/approachIn keeping with the extant literature, research questions were developed regarding the factors influencing the credibility assessment of external audits. Data collected from 100 companies in the Polish food sector were used to construct the model and carry out statistical analyses. Linear regression analyses were also applied to determine the key factors influencing the credibility of audits.FindingsThis study is part of the research trend on the rationality of external audits and certification of quality management systems. This paper identifies nine main factors shaping the credibility of external audits. Two of them have the most decisive influence on credibility. The first one is the professional audit method (procedure). The second factor is the auditor’s knowledge of the specificity of the audited area.Research limitations/implicationsThis study did not consider the impact that the image/credibility of the organization represented by the auditors may have on the reliability of audits. This is one of the fundamental limitations that should be considered when analyzing the obtained results. To recognize this type of dependence, additional research should be carried out. Another limitation is that the research covers the food industry only. It would be interesting to know the situation in other types of industries.Practical implicationsThis paper looks at the possibility of increasing the added value for audited enterprises. The proposed model can be used by managers of organizations conducting external audits and auditors to effectively use resources for process improvement, influencing the maximization of credibility of activities in the area of conformity assessment.Originality/valueThe originality of this study lies in adopting the perspective of audited enterprises in assessing the credibility of audits. To the best of the authors’ knowledge, this is the first study that adopts this approach. This paper contributes to the literature, particularly to better understand audited enterprises’ behavior (trust in audit results, satisfaction with audits, etc.).

THE IMPACT OF FINANCIAL STATEMENT FRAUD THROUGH THE FRAUD HEXAGON ON CONSUMER CYCLICALS SECTOR COMPANIES ON THE INDONESIA STOCK EXCHANGE IN 2020-2022

The objective of this study is to collect empirical evidence regarding the Factors in the Fraud Hexagon Theory that can be used to detect financial statement fraud. The case study of the Consumer Cyclical Sector on the IDX in the range of 2020-2022 is used in testing the Fraud Score model. In this analysis, 89 Consumer Cyclicals companies serve as samples, purposeful sampling is used to select samples, in this study, financial statement fraud (KLK) is the dependent variable. The independent variables used are financial targets, financial stability, external pressure, CEO education, political connections, state-owned enterprises, external auditors, rationalization, and CEO duality. EViews version 13 testing software was used for data analysis of multiple linear regression analysis. This study shows that financial statement fraud is significantly influenced by external pressure and rationalization. There is no statistically significant correlation between financial objectives, financial stability, and rationalization.

Effects of Audit Committee on Fraudulent Financial Reporting Among Listed Firms in Kenya.

Fraudulent financial reporting poses significant risks to the integrity of financial markets, investor confidence, and the overall economy. As a result, effective corporate governance mechanisms are crucial in mitigating the occurrence of fraudulent activities. The audit committee, as a key component of corporate governance, plays a vital role in overseeing financial reporting and providing assurance on the reliability of financial statements. This paper aims to explore the effects of audit committee characteristics on fraudulent financial reporting of listed firms in Kenya. Specifically, the study assessed the effect of Audit Committee; gender, financial expertise, size and independence on fraudulent financial reporting. The study was anchored on the Fraud Pentagon theory. Explanatory research design and longitudinal research design was employed in this study where secondary panel data was obtained through content analysis from audited financial statements spanning from 2012 to 2021. The study targeted listed firms in Kenya during the study period and only firms that met the inclusion and exclusion criteria were retained. After applying the inclusion/exclusion criteria only 40 firms formed the study population. Data was analyzed using descriptive and inferential statistics with the significance of each independent variable being tested at 95% confidence level. The findings show that Gender (β1 = -.1154, p=.000.05) and Financial expertise (β2 = -.200, p=.000.05), Size (β3 = -.1457, p=.001.05), and Independence (β4 = -.1818, p=.000.05) had negative and significant effect on fraudulent financial reporting on firms in Kenya. Thus, the study concluded that audit committee characteristics such as gender variability, audit committee size, audit committee financial expertise and audit committee independence significantly influence fraudulent financial reported among listed firms in Kenya. Based on the findings, the study recommends enhancing the effectiveness of the audit committee in preventing fraudulent financial reporting, organizations should strive for gender diversity within the committee. This can be achieved by actively seeking and appointing qualified female candidates to the audit committee. Promoting diversity ensures a range of perspectives and experiences, leading to more robust discussions, increased scrutiny of financial reporting practices, and improved decision-making. Secondly, Organizations should prioritize the independence of the audit committee by ensuring that committee members are free from any conflicts of interest and have no direct ties to management. Additionally, Organizations should carefully consider the size of the audit committee to optimize its effectiveness in addressing fraudulent financial reporting. Lastly, Organizations should establish mechanisms for continuous monitoring and evaluation of the audit committee's performance. Regular assessments of the committee's effectiveness in detecting and preventing fraudulent financial reporting can help identify areas for improvement.

Contante Justitie System in Corruption Cases in Indonesia: A Legal Constructivism System Paradigm

The legal consequences of Constitutional Court Decision Number 25/PUU-XIV/2016 stating that Law Number 31 of 199 in conjunction with Law Number 20 of 2001 concerning the Eradication of Corruption Crimes which is contrary to the 1945 Constitution and specifically deletes the phrase "can" in Article 2 paragraph (1) and Article 3 of the Eradication of the Criminal Act of Corruption Law have a legal impact on the characteristics of the offense. This was normative legal research which uses a statutory and conceptual approach. Results showed that the Financial Audit Board's future arrangements can fulfill the principle of Contante Justitie, namely speeding up the investigative examination process. It was applied by delegating authority from the Central BPK to the Regional BPK Representative auditors so that the latter have independent investigative audit authority to speed up the investigative Audit Result Report process in handling corruption to fulfill the legal system constructivism concept.

Corporatization of Professional Bodies: A Comparative Study of the Chartered Institute of Government Finance Audit and Risk Officers (CIGFARO) and Institute of Local Government Management (iLGM)

Corporatization of professional bodies may be seen as a new phenomenon, but it has been a call since the 1980s when many professional bodies started experiencing decline. Although corporatization, as practice, is a private sector concept, applying it in the management and administration of professional bodies is likely to provide a better turn-around in how professional bodies are managed. Part of corporatization is having corporate governance structures including ethics codes which are meant to professionalize professional bodies. This study therefore compared the Chartered Institute of Government Finance Audit and Risk Officers (CIGFARO) and Institute of Local Government Management (iLGM) with a view to establish if they apply corporatization.

Navigating Ethics: Insights into External Auditor Compliance from Financial Managers and Internal Auditors in Jordanian Companies

This study aims to assess to what extent Jordanian external auditors comply with the Code of Ethics for Professional Accountants, as perceived by financial managers and internal auditors. The hypotheses are tested using one sample and an independent sample t-test for a sample of 53 industrial public shareholding companies listed on the Amman stock exchange during 2020–2023. The study utilized the survey instruments to collect the necessary data from 200 participants. The findings show that the external auditor complies with the code of professional ethics at a high to moderate level per the Relative Important Index from the viewpoint of both financial managers and internal auditors. Moreover, the outcomes also show there are no significant variances between their beliefs regarding the adherence of external auditors to the code of ethics. The study consequences indicate that the enacted regulations that organize the work of the auditors can effectively enhance the compliance of Jordanian auditors with the code of professional ethics. Nevertheless, it emphasized the need for more shared efforts for more compliance with professional ethics in the auditing profession. The study suggests Many recommendations to enhance auditors’ compliance such as continuous oversight of auditor compliance from the Jordanian Association of Certified Public Accountants, ethical awareness, research and development in the area of ethics, and training programs to explain ethical complexities. This study assures the importance of enhancing ethical compliance in the auditing profession in an emerging country to increase public trust, attract investment, and improve financial statements integrity.

Opportunities or Challenges? Audit Risk and Blockchain Disclosures in 10-K Filings

SUMMARY This study investigates whether audit clients’ blockchain activities (including crypto-related activities) affect audit risk by examining the association between blockchain disclosures in 10-K filings and audit fees. Focusing on U.S. firms between 2013 and 2020, we empirically show that audit fees are higher for companies disclosing blockchain activities in 10-K filings. We further find that this positive association is more pronounced for companies disclosing current blockchain implementation than for companies with plans for blockchain activities. The results indicate that clients’ blockchain activities influence audit risk as assessed by external auditors. As blockchain technology and its applications are emerging, our findings have implications that should be considered by auditors, regulators, and top management.

Does Cultural Embeddedness on Cigarette Packages Mitigate Environmental Information Credibility? Evidence from China

ABSTRACT Drawing on the behavioral consistency theory, we examine whether cultural embeddedness on cigarette packages as a sinful behavior window dressing affects environmental information credibility, and further investigate the moderating role of high-quality external audit (Big4 auditors). Using hand-collected data from China, our findings reveal that cultural embeddedness on cigarette packages at the province level is significantly negatively associated with corporate environmental information credibility, suggesting that cultural embeddedness on cigarette packages shapes unethical social atmosphere around firms, triggers managers to cover up environmental misconducts, and eventually mitigates environmental information credibility. Moreover, Big4 auditors weaken the negative relation between cultural embeddedness on cigarette packages and environmental information credibility. Above findings are robust to a variety of sensitivity tests using alternative proxies for cultural embeddedness on cigarette packages and environmental information credibility, and further our conclusions are still valid after using the propensity score matching method, two-stage instrumental variable OLS-TOBIT regression procedures, and Heckman two-stage regression approach to address the endogeneity issues. Furthermore, cultural embeddedness on cigarette packages significantly positively induces greenwashing. Lastly, our main findings are more pronounced for firms without pollution control departments, with lower investment in environmental technologies, with less media coverage and in provinces with lower legal enforcement.

Digital transformation in Vietnam: the impacts on external auditors and their practices

Purpose This study aims to explore some perceptions related to the suggestion that external auditors will be replaced by audit technologies that use artificial intelligence (AI) tools to make audit judgements when performing the financial statement audits. Digital transformation is revitalising the technologies used by external auditors and their firms; thus, the authors seek to understand what challenges this creates for the auditing profession in Vietnam. Design/methodology/approach Through the theoretical lens of new institutionalism theory, this study uses a qualitative approach involving 20 semi-structured interviews conducted with external auditors in Vietnam during 2022. This sample includes the global Big Four, global mid-tier and smaller local Vietnamese audit firms. Findings The findings indicate that there is resistance or disagreement with the suggestion that in the future audit technologies using AI tools can replace humans (external auditors). The role of external auditors in the professional services sector will gradually be changed by audit technologies; however, external auditors are unlikely to be replaced by audit technologies that use AI tools based on the responses of the participants. Strict institutional rules that exist in Vietnam would prevent the replacement of (human) external auditors. In the future, external auditors may take on new roles as consultants, with unique skills in classifying and processing data for decision-making processes; however, they will not be completely replaced by technology in the audit space. Research limitations/implications This study has limitations that it is based on the data collection from a single developing country, Vietnam; therefore, the generalisability of the findings is limited to Vietnam. Also, the authors sought insights into the future of external audits in Vietnam. Practical implications This study highlights the changing role of auditors and institutions. Thus, policymakers, external auditors and auditees in other developing countries would find the findings helpful. Originality/value This study provides new perspectives, particularly from local Vietnamese firms, about audit practices that emerge due to high-level technological advancements and then embed themselves into existing audit practices in an emerging economy. Prior studies tended to focus on the global Big Four firms, thus this study contributes by sharing the perceptions of the smaller practitioners also.

Beyond Expectations: Corporate Governance's Insufficiency in Fraud Prevention

Objective –The specific objectives to be achieved in this research are to (1) test the Beneish model (1999) as a predictor of reliable manipulation or indicator to reveal signals or symptoms of financial reporting fraud. (2) Test whether corporate governance effectiveness reduces financial statement fraud.Design/Methodology –The research analyzed publicly listed non-financial firms listed in Indonesia's stock exchange (IDX) from 2017 to 2022. Simple random sampling was used to select 86 companies per year, resulting in 617 year-firm observations. Data analysis was carried out by logistic regression multiple with panel data. The test was carried out by adopting the Beneish benchmark index (Z-score) model which is effective for predicting indications of fraudulent financial statements. Results –The test results show that there is 99.8% of incidents indicated financial statement fraud and the other 0.2% did not indicate financial statement fraud. Corporate governance mechanisms consisting of institutional ownership, audit committees, and audit quality does not mitigate fraud. It is anticipated that the research's contribution will serve as a practical guide and reference for the examination of indicators of fraud in corporate finances. The findings of this study are expected to provide valuable insights for policymakers and regulators seeking to improve corporate governance practices.Research limitations/implications –This research does not incorporate the competency and capability specifications of governance structures such as the board of commissioners, audit committees, and external auditors. Future investigations are anticipated to delve more profoundly into the internal and external corporate governance capabilities and specifications.Novelty/Originality –This study reveals that, on the whole, a significant proportion of companies are implicated in fraudulent activities, while corporate governance mechanisms are deemed inadequate in overseeing management activities conducive to fraud. The outcomes of this research challenge the prevailing paradigm of corporate governance as an effective deterrent against fraudulent behavior.

Academics' Beliefs Regarding the Importance of Curriculum Internationalization in the Ethiopian Research Universities

This study set out to investigate the beliefs of academics regarding the importance of curriculum internationalization in Ethiopian research universities. A convergent-parallel mixed-method design was used to achieve this purpose. Quantitative data was gathered from 415 randomly chosen academics taken from a sample frame of 6808 through a questionnaire. Using a semi-structured interview, 16 purposefully chosen individuals provided qualitative data. The questionnaire's construct, face, content, and pilot test validity were examined. Moreover, triangulation, use of multiple methods, external audits, and low inference descriptors were employed for the qualitative instrument. Descriptive statistics (frequency, percent, mean, and standard deviation) and inferential statics (Chi-square, Cramer's-V test, and one-way ANOVA) were used to examine the quantitative data. Bell's “Spectrum of Acceptance of Internationalizing Curriculum,” integrated with Ellingboe's “Great Divide,” was used to identify the positions of the academics in their beliefs. The qualitative data was analyzed using descriptive statements and presented thematically based on research questions. Hence, major findings revealed that academics' representations based on their demographic variables were not as expected; their variation was practically not significant among universities; the majority of academics had crossed Ellingboe's “Great Divide”; significant differences among disciplines and/or universities were not observed in this study. Finally, urging academics to actively integrate international perspectives into their curricula, elevating curriculum internationalization of higher education to a national priority, and undertaking extensive national research emerged as key recommendations for the Ethiopian Research Universities, Ethiopian Ministry of Education, and future research endeavors, respectively.

THE INFLUENCE OF COMPANY SIZE ON AUDIT REPORT LAG IN COMPANIES LISTED ON THE INDONESIA STOCK EXCHANGE

A financial report audit has the aim of providing an opinion regarding the fairness and conformity of financial reports with applicable principles. Financial report audits are carried out to provide assurance of the reliability of financial reports. Financial reports are a means of communication and accountability for internal company parties to external parties, especially for companies that go public. Company financial reports contain information that is a tool for stakeholders and users of financial reports in making decisions. To ensure that financial reports are useful in decision making, reliability and timeliness (relevance) are very important. If there is a delay in reporting financial reports, this can affect users of financial reports in making decisions and predictions.

A Proposed Frame work for External Auditor using of Root Cause Analysis in Fraud Detection and Analysis

A Proposed Frame work for External Auditor using of Root Cause Analysis in Fraud Detection and Analysis

The role of the external auditor In reducing material misstatements and their Impact on the auditor's report

The role of the external auditor In reducing material misstatements and their Impact on the auditor's report

Dynamic anthropomorphic thorax phantom for quality assurance of motion management in radiotherapy

Background and purposeMotion management techniques are important to spare the healthy tissue adequately. However, they are complex and need dedicated quality assurance. The aim of this study was to create a dynamic phantom designed for quality assurance and to replicate a patient’s size, anatomy, and tissue density. Materials and methodsA computed tomography (CT) scan of a cancer patient was used to create molds for the lungs, heart, ribs, and vertebral column via additive manufacturing. A pump system and software were developed to simulate respiratory dynamics. The extent of respiratory motion was quantified using a 4DCT scan. End-to-end tests were conducted to evaluate two motion management techniques for lung stereotactic body radiotherapy (SBRT). ResultsThe chest wall moved between 4 mm and 13 mm anteriorly and 2 mm to 7 mm laterally during the breathing. The diaphragm exhibited superior-inferior movement ranging from 5 mm to 16 mm in the left lung and 10 mm to 36 mm in the right lung. The left lung tumor displaced ± 7 mm superior-inferiorly and anterior-posteriorly. The CT numbers were for lung: −716 ± 108 HU (phantom) and −713 ± 70 HU (patient); bone: 460 ± 20 HU (phantom) and 458 ± 206 HU (patient); soft tissue: 92 ± 9 HU (phantom) and 60 ± 25 HU (patient). The end-to-end testing showed an excellent agreement between the measured and the calculated dose for ion chamber and film dosimetry. ConclusionsThe phantom is recommended for quality assurance, evaluating the institution’s specific planning and motion management strategies either through end-to-end testing or as an external audit phantom.

Pengaruh Pendapatan Asli Daerah Dan Pendapatan Transfer Terhadap Kinerja Keuangan Pemerintah Daerah Provinsi Jawa Timur

This research aims to examine the influence of Regional Original Income, General Allocation Funds and Special Allocation Funds on Regional Government Financial Performance. Using 38 samples of Regional Revenue and Expenditure Budget Realization Reports (APBD) for Regency/City Regional Governments in East Java Province for the 2020-2022 period which have been officially published and audited by the East Java Province Representative Financial Audit Agency (BPK Jatim). Testing was carried out using multiple regression. The test results prove that Regional Original Income has an influence on Regional Government Financial Performance. General Allocation Funds and Special Allocation Funds have no effect on Regional Government Financial Performance.