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.