The Corporate Decision in Indonesia: A Result of Corporate Governance Requirements, Earning Management and Audit Reports

Abstract

In this chapter we investigated the importance of the Audit Statement of Opinion in the Final Audit Report to ensure good corporate governance and to reduce earnings management and ensure accurately informed corporate decisions. After going through literature and discussing with peers we hypothesized that this does have an effect on all the three processes.

A self-administered survey was purposely designed for the study after consulting the literature and referring to established frameworks and consulted with accounting executives. The survey consisted of an introduction page and four sections contained statements relating to each of the following four themes: “earnings management”; “audit statement and report”; “corporate governance”; and “the corporate decision.” For all statements, participants were asked to respond to a five-point Likert items ranging from “strongly disagree” (coded as “1”) to “strongly agree” (coded as “5”).

The research was conducted with a population of 100 accounting managers and financial managers of manufacture companies listed on Bursa Efek Indonesia (BEI) during 2015. To test the hypothesis, we used SPSS (Version 22) to carry out a regression analysis using the F and t tests.

It is determined that the three hypotheses were correct and the Audit Statement of Opinion in the Final Audit Report influences corporate governance and earning management reducing deviant behavior and that there is a significant reliance by Indonesians managers/investors on it when taking corporate decision.

Citation

Suryanto, T. and Grima, S. (2018), "The Corporate Decision in Indonesia: A Result of Corporate Governance Requirements, Earning Management and Audit Reports", Grima, S. and Marano, P. (Ed.) Governance and Regulations’ Contemporary Issues (Contemporary Studies in Economic and Financial Analysis, Vol. 99), Emerald Publishing Limited, Leeds, pp. 183-206. https://doi.org/10.1108/S1569-375920180000099009