THE EFFECT OF AUDIT QUALITY AND COMPANY CHARACTERISTICS ON EARNINGS MANAGEMENT
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Date
2024-02-05
Authors
Juki, Erlina
Journal Title
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Publisher
Sekolah Tinggi Ilmu Ekonomi Trisakti
Abstract
This research is conducted with purpose to obtaining empirical evidence regarding effect of audit firm size, auditor industry specialization, audit tenure, profitability, financial leverage, firm size, free cash flow, and sales growth as independent variables on earnings management as dependent variable.
The population of this research are consumer non-cyclicals and consumer cyclicals companies which are listed on Indonesia Stock Exchange (IDX) from 2020 until 2022. In this research, sampling method used is purposive sampling and resulted in 59 companies with 175 data. The hypothesis testing method used is multiple regression method.
The results of this research show auditor industry specialization and profitability have positive effect on earnings management, meanwhile free cash flow has negative effect on earnings management. Besides that, audit firm size, audit tenure, financial leverage, firm size, and sales growth have no effect on earnings management. With increasing auditor’s expertise in their industry, there’s a possibility management might try various ways to manipulating company’s activities to increasing earnings. The higher profitability the greater expectations to achieve greater profit in next period, so they tend to doing earnings management. Low free cash flow indicates cash is not available for growth. Therefore, it encourages management to carry out earnings management.