The Effect of Good Corporate Governance and The Level of Asymmetry of Information on The Practice of Earnings Management with Audit Quality as a Moderating Variable

Untari, Ervina Febri. 2016. “The Effect of Good Corporate Governance and The Level of Asymmetry of Information on The Practice of Earnings Management with Audit Quality as a Moderating Variable”. Essay, The Accounting Department, Economic Faculty, Universitas Negeri Malang. Preceptor (I) Dr. Satia Nur Maharani, SE., MSA., Ak. (II) Dr. Suparti, M.P.
Kata kunci: Good Corporate Governance, Institusional Ownership, Number of Board of Directors, Audit Committee, The Level of Asymmetry of Information, The Practice of Earnings Management, Audit Quality Corporate Governance is series of mechanisms that direct and control an enterprise, so that the company’s operations in line with expectations of stakeholders. Good Corporate Governance (GCG) is an important role as monitoring of all operational activities, so the application of GCG is expected to reduce earnings management behavior. Implementation of GCG is based on agency theory that explains the relationship between management and the owners. This study aimed to examine the effect of Good Corporate Governance (Institutional Ownership, Number of Board of Directors, the Audit Committee) and Level of Information Asymmetry on the Earnings Management Practices Audit Quality as a moderating variable . This research is a quantitative research with a population of 42 banks in 2012-2014. Analyzed using multiple regression test and moderated regression analysis (MRA), which was preceded by the classical assumption test consisting of normality test, autocorrelation and heteroscedasticity test. Hypothesis testing is done by using the t test. Based on the results of the t test (partial) showed that the independent variables, institutional ownership and the level of information asymmetry has an influence on earnings management practices. The variable number of the board of directors and audit committee had no effect on earnings management practices. No influence on the quality of the audit as moderating variable to earnings management practices in this study indicate that both the big four accounting firm and non big four can not to minimalized management opportunity to perform earnings management practices. Based on the research results, it is advisable for investors to not only focus on profit information but also consider non-financial information such as corporate governance practices. For companies, the GCG should apply consistently and fully in accordance with the provisions and the applicable legislation. For further research, it is expected to do further research using a sample of more than one industry group and use the latest data as well as the recently published financial statements, using the latest observation period is expected to get better information.

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