Prihat Assih_abstract_1332009

KUALITAS AUDITOR EKSTERN DALAM MEMBATASI
KESEMPATAN MANAJEMEN  UNTUK MELAKUKAN  MANAJEMEN LABA
 
 
Prihat Assih
Jurusan Akuntansi Fakultas Ekonomi Universitas Merdeka Malang
Jl. Terusan Raya Dieng 62-64 Malang, 65146

Korespondensi dengan Penulis:
Prihat Assih: Telp. + 62 341 568 395
E-mail: prihat2001@yahoo.com

Abstract:

Earnings management practice related to a variety incentives to maximize firms’ value or to increase manager welfare. Many researchers focused on 3 main incentives for earnings management practice, as explained in positive accounting theory, that were incentive to decrease cost of debt covenant default, maximize bonus and reduce political cost (Watts & Zimmerman, 1986). However, the earnings management would exist if management had incentive and opportunity to do so (Trueman & Titman, 1988; Christensen, et al., 1999).  The objective of this research was to investigate external auditor quality as factor to constraining earnings management by managers. Analysis was based on 111 publicly manufacturing firms in Indonesian Stock Exchange period 2005 up to 2008. The result showed that the high level of firms’ debt motivated manager to practice more earnings management. However, the level of earnings management was lower when the quality of auditor external work was higher. The results of these researches contributed to accounting literature development especially in corporate governance. Qualified auditor, one of monitoring aspects, had function as good corporate governance mechanism for reducing management practice to manage earnings which would be costly for financial statement users.

Key words: earnings management, positive accounting theory, external auditor quality, corporate governance.

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