This study investigates the effect of audit quality on earnings management behavior using a variety of audit quality proxies, either using a single proxy or a joint test of some proxies of audit quality. The study proposed a new composite measure of audit quality called the Audit Quality Metric Score (AQMS), which represents the dimension of competence and independence of audit quality. The study compared the validity of the conventional and the multidimensional measurement of audit quality. With a sample of 1,152 firm-years panel data of non-financial companies listed in the Indonesia Stock Exchange (IDX) for the year 1999-2007, the study found a negative effect of audit quality over the accrual earnings management, whether using conventional or multidimensional measures of audit quality. These findings are consistent with the previous findings. The study did not find evidence that composite measure of audit quality has higher validity than conventional measures. Rather, we found evidence that Big 4 as a single proxy of audit quality has higher validity compared to the other proxies or using AQMS. The findings of this study are robust due to sensitivity test that support the main findings.

Prior research had documented that The Big 4 auditors have higher audit quality than non-Big 4 auditors (Teoh and Wong 1993), and The Big 4 auditors with industry specialization have higher audit quality than The Big 4 auditors without specialization (Balsam et al. 2003;Knechel et al. 2007;Behn et al. 2008;Romanus et al. 2008

ABSTRAKStudi ini menguji pengaruh kualitas audit terhadap manajemen laba transaksi real dalam pengakuan pendapatan strategis. Kualitas audit diukur dengan masa penugasan audit jangka waktu menengah, dan spesialisasi industri dari Kantor Akuntan Publik (KAP). Pengakuan pendapatan strategis diukur dengan perubahan pendapatan deferal jangka pendek abnormal. Sampel penelitian dari studi ini terdiri dari 1.113 observasi tahunperusahaan dari perusahaan terdaftar di Bursa Efek Indonesia (BEI) untuk tujuh tahun pengamatan (2004)(2005)(2006)(2007)(2008)(2009)(2010). Dengan menggunakan regresi berganda dari data pooled crosssectional, kami menemukan sebagian bukti adanya pengaruh kualitas audit terhadap pengakuan pendapatan strategis, yaitu KAP dengan spesialisasi industri memiliki pengaruh positif terhadap perubahan pendapatan deferal abnormal. Kami tidak menemukan bukti bahwa masa penugasan audit jangka waktu menengah berpengaruh terhadap perubahan pendapatan deferal abnormal. Temuan penelitian ini robust, setelah mempertimbangkan hasil pengujian sensitivitas yang mendukung temuan utamanya.Kata Kunci: Kualitas audit, masa penugasan audit, spesialisasi industri, manajemen laba transaksi real, pengakuan pendapatan strategis. ABSTRACT PENDAHULUANPenelitian sebelumnya menemukan bahwa manajemen cenderung melakukan manajemen laba transaksi real untuk mencapai target laba dibanding manajemen laba berbasis akrual (Graham et al. 2005). Manajemen memilih manajemen laba transaksi real karena transaksi real lebih sulit dideteksi oleh auditor (Cohen dan Zarowin 2010). Beberapa penelitian terdahulu menemukan beberapa pola manajemen laba transaksi real, yaitu manipulasi dalam operating activities, investing activities, dan financing activities . Manipulasi operating activities dapat dilakukan dengan tiga cara, yaitu manipulasi penjualan, penurunan beban-beban diskresioner, dan produksi yang berlebihan (Roychowdhury 2006;Ratmono 2010). Selain manipu-

This study investigates how the capital market response to a variety of earnings management tools i.e., accrual-based earnings management, real transaction activities, and strategic revenue recognition. We measure the market response to the information content of earnings by the earnings response coefficient (ERC). By using pooled-OLS regression from 748 firm-years data of public listed companies on the Indonesian Stock Exchange (IDX) in 2004-2009, we find some evidence of a negative association between earnings response coefficients and information content of earnings that contained earnings management. Our study find that real transactions earnings management in operating activities has negative association with earnings response coefficient, but we do not find any evidence from the other earnings management tools. The findings of this study imply that the market participants are able to capture a certain kind of earnings management behaviour that may reduce the earnings response coefficient. Keywords:Real transaction activities; accrual earnings management; strategic revenue recognition ABSTRAK Penelitian ini bertujuan untuk mengetahui bagaimana respon pasar terhadap berbagai cara dalam melakukan manajemen laba seperti manajemen laba berbasis akrual, manajemen laba melalui aktivitas riil dan manajemen laba melalui strategi pengakuan pendapatan. Respon pasar terhadap kandungan informasi laba diukur dengan earning response coefficient (ERC). Data diolah menggunakan pooled-OLS untuk 748 pengamatan yang berasal dari perusahaan-perusahaan yang terdaftar di Bursa Efek

'(& (We investigate the association between related party transactions (RPT) and real earnings management (REM). We also investigate the role of internal governance mechanism through the effectiveness of board of commissioner and audit committee in mitigating the association between RPT and REM. Our research sample consists of 386 firm-years of manufacturing firms listed in Indonesian Stock Exchange (IDX) from year 2010 -2014. Using linear regression, we find evidence that RPT has positive association with REM, only when the firm has higher RPT but not in the lower RPT. We find a contradictory result that board of commissioners strengthen the positive association between RPT and REM. Finally, we find evidence that the effectiveness of audit committees weaken the positive association between RPT and REM, both in full sample and in high RPT sample.

This study investigates the association of industry specialization at the engagement partner level and audit firm level with aggressive earnings management and modified audit opinion. The study employs a sample of 570 firm-year observations of manufacturing industries on the Indonesia Stock Exchange from 2014 to 2018 using a binary logistic regression model. First, this study finds no evidence of a relationship between industry specialization at the engagement partner level and audit firm level with aggressive discretionary accruals. Furthermore, the author finds evidence of a positive association between industry specialization at the audit firm level and aggressive real earnings management due to high audit quality. Finally, the study finds evidence that industry specialization at audit firm level is likely to issue modified audit opinion. This study contributes to the study of industry specialization at the engagement partner level and audit firm level, which is rarely performed in Indonesia. Policy makers and capital market players might learn some lessons from the audit quality of external auditors with industry specialists as the gatekeeper of the capital market. Moreover, this study has provided a valuable perspective to practitioners, researchers, and policy makers in other emerging markets regarding the quality of industry specialization at the partner and audit firm level.

This study investigates the impact of client importance on auditor independence measured by accrual earnings management and going-concern opinion. Our research sample consists of 1,080 firm-years of observation from listed companies in the Indonesia Stock Exchange (IDX) with eight years of observation (2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011). With pooled OLS we found that client importance has a negative impact on accrual earnings management. We also found evidence that client importance has a positive impact on going-concern opinion. Collectively, our evidence suggests that although audit firms have economic dependence toward their clients, those audit firms can maintain their audit quality by keeping their independency toward their clients, reflected by the lower accrual earnings management and higher tendency of issuing going-concern opinion. Our results are robust by considering the results of our sensitivity tests that support the main results.Keywords: audit quality, auditor independence, client importance, earnings management, going-concern opinion Abstrak Penelitian ini menguji pengaruh kepentingan klien terhadap independensi auditor yang diukur dengan manajemen laba berbasis akrual dan opini going-concern. Sampel penelitian terdiri dari 1.080 observasi dalam tahun-perusahaan dari perusahaan terdaftar di Bursa Efek Indonesia (BEI) dengan delapan tahun pengamatan (2004)(2005)(2006)(2007)(2008)(2009)(2010)(2011). Dengan menggunakan pooled OLS, kami menemukan bahwa kepentingan terhadap klien (client importance) berpengaruh negatif terhadap manajemen laba akrual. Kami juga menemukan bukti bahwa kepentingan terhadap klien berpengaruh positif terhadap opini going-concern. Secara keseluruhan, temuan-temuan kami menyimpulkan bahwa walaupun Kantor Akuntan Publik memiliki kepentingan ekonomi terhadap klien, namun Kantor Akuntan Publik memelihara kualitas audit dengan menjaga tingkat independensi terhadap klien mereka, tercermin dari manajemen laba akrual yang lebih rendah, dan terdapat kecenderungan yang lebih tinggi dalam memberikan opini going-concern. Hasil studi ini robust setelah mempertimbangkan hasil dari pengujian sensitivitas yang mendukung pengujian utamanya.Kata kunci: kualitas audit, independensi auditor, kepentingan terhadap klien, manajemen laba, opini going-concern

This study examines the association of tax aggressiveness with voluntary auditor changes, both because of auditor dismissal and resignation. Our study also examine the role of the auditor's economic dependence to the client in the relationship of tax aggressiveness and auditor changes. Using observation data from the manufacturing sector in the Indonesia Stock Exchange and using logistic regression of tax shelter prediction model, we find a positive association between tax aggressiveness and voluntary auditor changes. We also find evidence that the economic dependence of auditors on their clients weaken the positive relationship between tax aggressiveness and auditor changes. This findings have implications for the stakeholders that the client-auditor relationship is sensitive due to the tax aggressiveness activities, and this relationship can be moderated by the auditor's economic interest in the client.