Earnings Management and Audit Quality in Indonesian IPO Companies

Abstract

Wulandari, Adistyana Dyah (2006). Earnings Management and Audit Quality in Indonesian IPO Companies. Yogyakarta. International Program. Faculty of Economics. Islamic University of Indonesia. This paper examines the relationship between audit quality (as measured by auditor size and industry specialization) and earnings management (as measured by unexpected accruals) in Indonesian IPO companies. Prior studies done by Zhou and Elder (2003) prove that big five auditors and industry specialist auditors wrotrain earnings management for IPO firms inthe US. The purpose ofthis study istoprovide further evidence for Indonesian case. Data employed in this research is secondary data. The population of this research is all non-manufacturing and manufacturing companies listed in Jakarta Stock Exchange (JSX) which do an IPO process through out 1996-2004. The data period is pooled time series data. Some data are insufficient, incorrect, and incomplete. Final Researchobject is 55 data. The result of this research shows that industry specialist auditors have significant influence to less earnings management inthe IPO year in Indonesia. This evidence shows that in Indonesia, industry specialist auditors are better organized as a prominent element ofaudit quality by the IPO companies inIndonesia.