The Effect of Audit Committee, Audit Quality and Financial Distress on Earnings Management

Authors

  • Nurmawati Mambuhu Universitas Muhammadiyah Luwuk, Indonesia
  • Ridwansyah Ridwansyah Universitas Islam Negeri Lampung, Indonesia
  • Tri Widyastuti Ningsih Universitas Islam Negeri Walisongo Semarang, Indonesia
  • Irwan Moridu Universitas Muhammadiyah Luwuk, Indonesia
  • Hermiyetti Hermiyetti Universitas Bakrie, Indonesia.

DOI:

https://doi.org/10.37385/ijedr.v5i1.4207

Keywords:

Audit Committee, Audit Quality, Financial Distress, Manufacturing Companies, Earnings Management

Abstract

Many companies are starting to dare to go public so that the need for accounting services is also increasing. Accountant services are used to audit the company's financial statements, which later the quality of the audit results can have an impact on the actions the company will take in continuing its business. One condition that is not desired by all companies is financial distress, which is a condition where the company is on the verge of bankruptcy. This study aims to analyze and examine the factor influence of audit committee, audit quality and financial distress on earnings management. The method of research is using the quantitative and regression analysis. The sample is manufacturing companies that consistently publish financial reports for the 2017-2021 period listed on the Indonesia Stock Exchange with a total sample of 12 companies. The sampling technique used a purposive sampling. The data was analyzed with EViews 10 and was carried out by several tests such as classic assumption test, feasibility analysis, panel regression analysis and coefficient of determination test. The results of this study indicate that the audit committee and audit quality have no significant effect on earnings management. Meanwhile, financial distress has a significant effect on earnings management in manufacturing companies for the period 2017-2021. There is also a result which shows that the audit committee, audit quality and financial distress simultaneously influence earnings management. This research provides a practical contribution in minimizing earnings management actions and conceptual contributions to the development of literature on earnings management at a later date.

References

Alafiah, L. R., Fitrios, R., & Hanif, R. A. (2022). The Effect of Financial Distress, Audit Committee and Profitability on Tax Aggressiveness and its Impact on Firm Value. Substance: Source of Vocational Accounting Auditing and Finance Articles, 5(2), 95-120. https://doi.org/10.35837/subs.v5i2.1747

Albersmann, B. T., & Hohenfels, D. (2017). Audit Committees and Earnings Management: Evidence from the German Two-Tier Board System. Schmalenbach Business Review, 18(2), 105-115.

Arista, S., Wahyudi, & Yusnaini. (2018). The Effect of Corporate Governance Structure and Audit Tenure on Financial Statement Integrity. Journal of Accounting Research and Development, 12(2), 81-98.

Arista, S. P., & Serly, V. (2023). The Effect of Financial Distress, Audit Committee Characteristics and External Auditor Quality on Accrual Earnings Management. JEA: Journal of Accounting Exploration, 5(3), 917-935.

Chairunnisa, Z., Rasmini, M., & Alexandri, M. B. (2021). The Effect of Financial Distress on Earnings Management of Telecommunication Sub-Sector Companies Listed on the IDX for the 2015-2019 Period. Innovation, 17(3), 387-394.

Christiani, I., & Nugrahanti, Y. W. (2014). The Effect of Audit Quality on Earnings Management. Journal of Accounting and Finance, 16(1), 52-62.

Damayanti, S., & Krisnando. (2021). The Effect of Financial Distress, Audit Committee and Company Size on Earnings Management (Empirical Study of Real Estate and Property Companies Listed on the Indonesia Stock Exchange 2017-2020). Journal of STEI Ekonomi, 30 (01), 101-113.

Dwikusumowati, M. Z., & Rahardjo, S. N. (2013). The Effect of Audit Committee Characteristics and Earnings Management. Diponegoro Journal of Accounting, 2(4), 1-14.

Fatimah, S., Agustinawati, P., & Petro, S. (2020). The Effect of Corporate Governance Mechanisms, Audit Tenure, Company Size and Leverage on Financial Statement Integrity. Journal of Economic Education, 5(2), 1-13.

Gunanti, A. A. I. I. P., & Mahyuni, L. P. (2022). Millennial Generation Investment Interest in the Indonesia Stock Exchange. Innovation: Journal of Economics, Finance and Management, 18(3), 425-437. https://doi.org/10.29264/jinv.v18i3.10344

Haalisa, S. N., & Inayati, N. I. (2021). The Effect of Company Size, Audit Tenure, Audit Quality, and Audit Report Lag on Going Concern Audit Opinions. Review of Applied Accounting Research, 1(1), 29.

Hadi, F. I., & Tifani, S. (2020). The Effect of Audit Quality and Auditor Switching on Earnings Management. Scientific Journal of Accounting and Finance, 9(2), 117-129.

Hapsoro, D., & Annisa, A. A. (2017). The Effect of Audit Quality, Leverage, and Growth on Earnings Management Practices. Journal of Accounting, 5(2), 99-110.

Indriasih, D. (2020). Internal Auditor Competence and Audit Committee Character Against Fraudulent Financial Reporting. Bandung: CV Cendekia Press.

Irfani, A.S. (2020) Financial and Business Management: Theory and Application. Jakarta: Gramedia Pustaka Utama.

Lailatul, U., & Yanthi, M. D. (2021). The Effect of Audit Fees, Audit Committee, Audit Rotation on Audit Quality. AKUNESA: Unesa Accounting Journal, 10(1), 35-45. https://doi.org/10.26740/akunesa.v10n1.p35-45

Lidiawati, N., & Asyik, N. F. (2016). The Effect of Audit Quality, Audit Committee, Institutional Ownership, Company Size on Earnings Management. Journal of Accounting Science and Research, 5(5), 1-19.

Lubis, E. F., & Sipahutar, T. T. U. (2022). Factors Affecting Going Concern Audit Opinions in Manufacturing Companies Listed on the Indonesia Stock Exchange. MSEJ: Management Studies and Entrepreneurship Journal, 3(5), 2866-2878.

Muthmainnah, D. R. (2020). The Effect of Audit Quality and Audit Committee Effectiveness on Earnings Management. Business and Economics Conference in Utilization of Modern Technology, 15(2), 65-80.

Oktaviani, & Challen, A. E. (2020). The Effect of Auditor Quality, Audit Tenure and Debt Default on Going Concern Audit Opinion Acceptance. Journal of Accounting and Finance, 8(2), 83.

Ratmojoyo, Y. S., Supriyanto, T., & Nugraheni, S. (2021). Factors Affecting Interest in Investing in Sharia Shares. Etihad: Journal of Islamic Banking and Finance, 1(2), 115-131.

Sanjaya, F. B. (2017). The Effect of Auditor Industry Specialization, KAP Size, Audit Tenure, Family Ownership, and Earnings Quality on Cost of Equity. Journal of Business Accounting, 15(2), 263-289.

Santosa, C., Amiruddin, & Rashid, S. (2022). The Effect of Information Asymmetry, Financial Distress and Audit Committee on Earnings Management. Accruals: Journal of Contemporary Business and Accounting, 15(1), 12-22.

Siagian, A. O., Manurung, A. H., & Machdar, N. M. (2023). Analysis of Corporate Governance on Financial Distress through Moderating Variable Mechanisms with Earnings Management. Journal of Management Research and Innovation, 1(2), 151-165.

Supriyadi, Y. W., Ginting, Y. L., & Irwansyah. (2019). Characteristics of the Audit Committee in Influencing Earnings Management Actions (Empirical Study of Manufacturing Companies Listed on the IDX). Accounting Studies, 20(2), 178-190. https://doi.org/10.29313/ka.v20i2.4822

Ulina, R., Mulyadi, R., & Tjahjono, M. E. S. (2018). The Effect of Audit Quality and Audit Committee on Earnings Management in Manufacturing Companies Listed on the Indonesia Stock Exchange. Tirtayasa Ekonomika, 13(1), 1-26.

Wulandari, S., Ermaya, H. N. L., & Mashuri, A. A. S. (2021). The Effect of Corporate Governance Mechanisms, Financial Distress and Audit Tenure on Financial Statement Integrity. Jurnal Akunida, 7(1), 85-98.

Downloads

Published

2023-12-20

How to Cite

Mambuhu, N., Ridwansyah, R., Ningsih, T. W., Moridu, I., & Hermiyetti, H. (2023). The Effect of Audit Committee, Audit Quality and Financial Distress on Earnings Management . International Journal of Economics Development Research (IJEDR), 4(3), 1729–1744. https://doi.org/10.37385/ijedr.v5i1.4207