Variables analyzed in this study are only a few characteristics of the Audit Committee

Oct 13, 2025 by vinooalluri.com 47 views

The Influence of the Characteristics of the Audit Committee on the Practice of Profit Management in Manufacturing Companies Listed on the IDX in 2010-2012

Introduction

The Audit Committee plays a crucial role in overseeing the company's financial reporting, providing a safeguard against earnings management practices. The transparency and accuracy of financial information are essential for investors to assess company performance. This study examines the effect of the characteristics of the Audit Committee on earnings management practices in manufacturing companies listed on the Indonesia Stock Exchange (IDX) in the 2010-2012 period.

The Role of the Audit Committee in Preventing Profit Management Practices

The Audit Committee is responsible for ensuring the accuracy and transparency of financial reporting. The committee's active involvement in the supervision and evaluation of financial management performance is crucial in preventing earnings management practices. The frequency of audit committee meetings is a significant indicator of the committee's effectiveness in overseeing financial management.

The Frequency of Audit Committee Meetings and Earnings Management Practices

The results of this study show that the frequency of audit committee meetings has a significant influence on earnings management practices, with a negative direction. This means that the more often the audit committee holds a meeting, the lower the tendency of the company to make earnings management. This finding highlights the importance of an active and proactive Audit Committee in preventing earnings management practices.

The Independence of the Audit Committee

Although the independence of the Audit Committee is an essential factor in maintaining the integrity of financial reporting, this research shows that independence alone is not enough to prevent earnings management practices. Other factors, such as the active involvement of the Audit Committee in the supervision and evaluation of financial management performance, are also necessary.

The Size of the Audit Committee

This research shows that the size of the audit committee has no significant effect on earnings management practices. This may be because the size of the audit committee does not always correlate with the effectiveness of supervision. A small but active and experienced audit committee can be more effective in overseeing financial management than a large but less active audit committee.

The Competence of the Audit Committee

Audit Committee Competencies, measured based on the educational background and professional experience of its members, also did not show a significant effect on earnings management practices. This may be due to other factors, such as the ability of the audit committee in accessing financial information and the ability to understand the company's financial risks, which are more important in determining the effectiveness of supervision.

Implications for Stakeholders

This research has several important implications for stakeholders:

For Investors, this finding shows that it is essential to consider the frequency of audit committee meetings as one indicator of the quality of corporate governance. The Audit Committee that is active and proactive in carrying out its duties can provide a positive signal about the quality of corporate governance and reduce the risk of earnings management.
For Regulators, this study shows that it is necessary to consider strengthening the role of the Audit Committee in preventing earnings management practices. This can be done by clarifying the authority and responsibilities of the Audit Committee, supervising the performance of the Audit Committee, and increasing information transparency related to the Audit Committee.
For Companies, this research shows that it is essential to build an effective and independent audit committee. An effective audit committee can assist companies in achieving business goals by improving the quality of corporate governance, strengthening investor confidence, and reducing the risk of earnings management.

Limitations of the Study

This research has several limitations, including:

The data used is limited to manufacturing companies listed on the IDX in the 2010-2012 period. Research results may not be generalized to companies in other sectors or different time periods.
Variables analyzed in this study are only a few characteristics of the Audit Committee. Other factors that might affect the practice of earnings management, such as ownership structure and accounting quality, also need to be analyzed further.

Further Research Directions

Further research can be done to overcome this limitation, for example by:

Analyzing the influence of the characteristics of the audit committee on earnings management practices in companies in other sectors.
Analyzing the effect of other factors that might affect earnings management practices, such as ownership structures and accounting quality.
Expanding the research period to see the trend of the influence of the characteristics of the audit committee on earnings management practices.

This research is expected to contribute to the development of corporate governance in Indonesia, especially in the context of preventing earnings management practices.
Frequently Asked Questions (FAQs) about the Influence of the Characteristics of the Audit Committee on the Practice of Profit Management in Manufacturing Companies Listed on the IDX in 2010-2012

Q: What is the role of the Audit Committee in preventing profit management practices?

A: The Audit Committee plays a crucial role in overseeing the company's financial reporting, providing a safeguard against earnings management practices. The committee's active involvement in the supervision and evaluation of financial management performance is essential in preventing earnings management practices.

Q: What is the significance of the frequency of audit committee meetings in preventing earnings management practices?

A: The results of this study show that the frequency of audit committee meetings has a significant influence on earnings management practices, with a negative direction. This means that the more often the audit committee holds a meeting, the lower the tendency of the company to make earnings management.

Q: What is the importance of the independence of the Audit Committee in preventing earnings management practices?

A: Although the independence of the Audit Committee is an essential factor in maintaining the integrity of financial reporting, this research shows that independence alone is not enough to prevent earnings management practices. Other factors, such as the active involvement of the Audit Committee in the supervision and evaluation of financial management performance, are also necessary.

Q: What is the relationship between the size of the audit committee and earnings management practices?

A: This research shows that the size of the audit committee has no significant effect on earnings management practices. This may be because the size of the audit committee does not always correlate with the effectiveness of supervision. A small but active and experienced audit committee can be more effective in overseeing financial management than a large but less active audit committee.

Q: What is the significance of the competence of the audit committee in preventing earnings management practices?

A: Audit Committee Competencies, measured based on the educational background and professional experience of its members, also did not show a significant effect on earnings management practices. This may be due to other factors, such as the ability of the audit committee in accessing financial information and the ability to understand the company's financial risks, which are more important in determining the effectiveness of supervision.

Q: What are the implications of this research for investors?

A: This finding shows that it is essential to consider the frequency of audit committee meetings as one indicator of the quality of corporate governance. The Audit Committee that is active and proactive in carrying out its duties can provide a positive signal about the quality of corporate governance and reduce the risk of earnings management.

Q: What are the implications of this research for regulators?

A: This study shows that it is necessary to consider strengthening the role of the Audit Committee in preventing earnings management practices. This can be done by clarifying the authority and responsibilities of the Audit Committee, supervising the performance of the Audit Committee, and increasing information transparency related to the Audit Committee.

Q: What are the implications of this research for companies?

A: This research shows that it is essential to build an effective and independent audit committee. An effective audit committee can assist companies in achieving business goals by improving the quality of corporate governance, strengthening investor confidence, and reducing the risk of earnings management.

Q: What are the limitations of this study?

A: This research has several limitations, including the data used is limited to manufacturing companies listed on the IDX in the 2010-2012 period. Research results may not be generalized to companies in other sectors or different time periods. Variables analyzed in this study are only a few characteristics of the Audit Committee. Other factors that might affect the practice of earnings management, such as ownership structure and accounting quality, also need to be analyzed further.

Q: What are the further research directions?

A: Further research can be done to overcome this limitation, for example by analyzing the influence of the characteristics of the audit committee on earnings management practices in companies in other sectors. Analyzing the effect of other factors that might affect earnings management practices, such as ownership structures and accounting quality. Expanding the research period to see the trend of the influence of the characteristics of the audit committee on earnings management practices.

Q: What is the contribution of this research to the development of corporate governance in Indonesia?

A: This research is expected to contribute to the development of corporate governance in Indonesia, especially in the context of preventing earnings management practices.