Moderating effect of internal control system to determinants influencing the financial statement disclosure

Abstract

This study examines whether the internal control system moderates the relationship among budget expenditure, government size, legislative size, and audit findings on financial statement disclosure in Indonesia. This is a quantitative study that uses the purposive sampling technique to collect data from 240 local governments in Indonesia. Data were analyzed using Structural Equation Modelling (SEM) with Smart PLS. The results show that government size, legislative size, and audit findings had a positive and significant effect on financial statement disclosure, whereas budget expenditure does not. In addition, the findings revealed that the internal control system moderates the relationship between government size and legislative size and financial statement disclosure, but not by audit findings. The study contributed to extending the institutional and agency theory that explains these factors toward disclosure in the local government in Indonesia. The findings suggest that Indonesia’s local governments consider potential factors regarding increasing pressure to carry out disclosure of financial statements, as well as increasing the proper disclosure required by applicable Indonesian regulations.

Influence factors on financial statements disclosure of Indonesian local governments

“…The findings of this study do not agree with those of Nurlianto and Aswar (2020), who studied 80 local governments in Java and Sumatra in 2018, or Aswar et al (2021), who examined 240 LGFS in Indonesia in 2018. These two studies demonstrate no substantial relationship between the level of LGFS transparency and local government management budgets.…”

“…As a result, the government may be watched more closely, which relates to openness and accountability. According to Purnama and Alfina (2019), the size of the government had a favorable effect on the publication of LGFS information Aswar et al (2021). mentioned that the size of the government has a significant and favorable link with the disclosure of financial information.Public and Municipal Finance, Volume 12, Issue 2, 2023 http://dx.doi.org/10.21511/pmf.12(2).2023.07…”

Determinants of Mandatory Disclosure for Local Government Financial Statements

“…H3 and H0 are accepted in the Number of local parliaments variable. The findings of this study are corroborated by studies by Aswar et al (2021) and Handayani et al (2020), which demonstrate the number of DPRD.…”

“…According to institutional theory, DPRD members can keep an eye on budgetary allocations and put pressure on local governments to disclose in great detail how the budget was actually used. The number of local parliaments has a considerable favorable impact on the amount of disclosure of local government financial accounts, according to research by Handayani et al (2020) and Aswar et al (2021). H3: The level of disclosure in local government financial statements is significantly influenced favorably by the number of local parliaments.…”

El Sistema de Control Interno en el Sector Público de Perú: Una Revisión Sistemática

“…Eh ahí la importancia de tener un sistema de control interno de calidad con la finalidad de frenar o prevenir actos de corrupción dentro de las instituciones públicas. Moderating effect of internal control system to determinants influencing the financial statement disclosure (Aswar et al, 2021) Aswar, K., Jumansyah, J., Mulyani, S., & Sumardjo, M.…”