The effect of the quality of local government financial reports on corruption moderated with the audit findings

Abstract

The study examines the effect of the Quality of Local Government Financial Reports (LKPD) on corruption moderated by audit findings. The study was conducted on all provincial governments in Indonesia. Corruption is measured by data on corruption cases in the Attorney General’s Office. The audit findings are evaluated using weaknesses in the Information Control System (SPI) and discoveries of non-compliance with laws and regulations. This research use data regression, model testing, hypothesis testing, and coefficient of determination. The results reveal that the LKPD’s quality had a negative and significant impact on corruption. This analysis states that if the quality of LKPD increases by 1%, corruption will decrease by 0.80%. The audit findings strengthen the relationship between the quality of LKPD on corruption. This finding supports the agency theory and stewardship theory. Therefore, the provincial government should improve the quality of LKPD to minimize audit findings and corruption.

The Effect of Audit Findings, Follow-Up Audit Recommendations, And BPK Opinions from The Previous Year on The Determination of Opinions in Local Government Financial Statements

“…Local government financial reports (LKPD) are prepared in accordance with Government Accounting Standards as a means of holding regional heads accountable for budget implementation in a single fiscal year. Before the LKPD is approved by the regional parliament, it must be audited by the BPK as an independent state institution (Aminah et al, 2022;Din et al, 2017) in order to achieve transparency (Adiputra et al, 2018;Ratmono & Darsono, 2022;Willmott, 2020) and accountability in financial management (Ferry & Midgley, 2022). The audit aims to maintain the quality of accounting information presented in the local government's financial statements (Aboukhadeer et al, 2023).…”