Title
The implementation of good corporate governance model and auditor independence in earnings' quality improvement
Abstract
The general objective of this research is to explore the model of earnings quality monitoring and to examine the effect of auditor independence on the relationship between corporate governance mechanism and earnings quality. Specifically, this research is aimed to investigate the impact of ownership structure, commissioner board structure, audit committee structure, internal audit function, and internal control activity, on earnings quality by involving an interaction of these variables with auditor independence. Earnings quality is measured with two proxies. The first proxy is performance-adjusted discretionary accruals or also called Total Accrual, while the second utilizes Total Current Accrual. Achieving all objectives above, the author develops a model and analyses this model in two stages. In the first stage, the model is explored using analysis technique of correlation and regression. Second, fittingness of model is attested using regression analysis with a variety of variable controls and sample controls. Research object is the manufacture companies listed in Indonesia Stock Exchange in period 2011-2015. The Sample includes 112 companies with 560 data of research. After conducting outlier test, the suitable amount of data is 553. The Result of hypothesis test indicates that the model of earnings quality monitoring is constructed from the interaction of many variables. Corporate governance mechanism consists of variables such as ownership structure (managerial ownership and institutional ownership), commissioner board structure, audit committee structure, internal audit function, and internal control activity. Adjusted R-Square value is reaching for 3.3% with significance-value of 0.001. Partially, commissioner board structure, internal audit function, and internal control activity have a significant effect on earnings quality. Auditor independence does not moderate the impact of corporate governance components on earnings quality.
Keywords
auditor independence, corporate governance, discretionary accrual, earnings quality
JEL classifications
M40 , M41 , M49
URI
http://jssidoi.org/jesi/article/363
DOI
Pages
188-200
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