Earnings Management Factors In The Consumer Goods Industry During The Covid-19 Pandemic

Nur Azizah; Ratna Mappanyukki

doi:10.24912/ja.v27i3.1480

Authors

Nur Azizah Master Program of Accounting, Mercu Buana University, Jakarta
Ratna Mappanyukki Master Program of Accounting, Mercu Buana University, Jakarta

DOI:

https://doi.org/10.24912/ja.v27i3.1480

Keywords: Earnings Management; Audit Opinion; Tax Incentive; Leverage.

Abstract

The global proliferation of the Covid-19 pandemic has adversely impacted public health, society, and the economy. To face the pandemic, managers are frequently required to make highly complicated decisions about financial reports. Earnings management occurs when managers modify financial statements for the advantage of stakeholders by evaluating opportunities in certain business activities. This paper investigates the impact of audit opinion and tax incentives on earnings management and leverage as a moderating variable among consumer goods manufacturing companies. A purposive sampling technique was performed to select 15 manufacturers in the consumer goods industry subsector listed on the Indonesia Stock Exchange between 2019 and 2021, which matched the research criteria. This study's findings indicate that audit opinion and tax incentives influence earnings management among consumer goods companies in the COVID-19 pandemic era. Moreover, leverage was a moderating variable for audit opinion and earnings management, but it did not moderate the effect of tax incentives on earnings management.

Author Biographies

Nur Azizah, Master Program of Accounting, Mercu Buana University, Jakarta

azizahn998@gmail.com

Ratna Mappanyukki, Master Program of Accounting, Mercu Buana University, Jakarta

ratna_mappanyuki@mercubuana.ac.id

References

Abbas, A. (2018). Earnings Management In The Banking Industry And Its Impact On The Firm Value. AKRUAL: Jurnal Akuntansi, 10(1), 69–84.

Ali, B., and Kamardin, H. (2018). Real Earnings Management: A Review Of Literature And Future Research. Asian Journal of Finance and Accounting, 10(1), 440–456. https://doi.org/DOI:10.5296/ajfa.v10i1.13282.

Aljana, B. T., and Purwanto, A. (2017). The Influence Of Profitability, Ownership Structure And Audit Quality On Earnings Management (Study Of Manufacturing Companies Listed On The Indonesia Stock Exchange In 2013-2015). Diponegoro Journal of Accounting2, 6(3), 207–221.

Almashaqbeh, A. A., Abdul-Jabbar, H., and Shaari, H. (2018). Real Earnings Management And Tax Considerations: A Conceptual Analysis. International Journal of Business Management and Commerce, 3(2), 25–35.

Atuilik, W. A., and Salia, H. (2018). The Importance Of Financial Reporting To Capital Market Development In Ghana. Journal of Economics and International Finance, 10(8), 89–94. https://doi.org/10.5897/JEIF2017.0840.

Brammer, S., Branicki, L., and Linnenluecke, M. K. (2020). COVID-19, Societalization, And The Future Of Business In Society. Academy of Management Perspectives, 34(4), 493–507. https://doi.org/https://doi.org/10.5465/amp.2019 .0053.

Callao, S., Jarna, J. I., and Wroblewski, D. (2021). A Systematic Approach To The Motivations For Earnings Management: A Literature Review. International Journal of Emerging Trends in Social Sciences, 10(1), 1–20. https://doi.org/10.20448/2001.101.1.20.

Campbell, S., Greenwood, M., Prior, S., Shearer, T., Walkem, K., Young, S., Bywaters, D., and Walker, K. (2020). Purposive Sampling: Complex Or Simple? Research Case Examples. Journal of Research in Nursing2, 25(8), 652–661. https://doi.org/Doi: 10.1177/1744987120927206.

Chen, H. (2020). The Impact Of Financial Leverage On Firm Performance – Based On The Moderating Role Of Operating Leverage. Fifth International Conference on Economic and Business Management, 464–473.

Cudia, C. P., and Cruz, A. L. C. D. (2018). Determinants Of Earnings Management Choice Among Publicly Listed Industrial Firms In The Philippines. DLSU Business and Economics Review, 27(2), 119–129.

Cumbe, L. L., and Inácio, H. (2018). The Impact Of External Audit On The Accountability Of The Common Fund Of The Mozambique National Institute Of Statistics. Managerial Auditing Journal, 33(6/7), 538–557. https://doi.org/https://doi.org/10.1108/MAJ-01-2017-1500.

Devie, Ellen, A., Angelina, C., and Fenella, J. (2019). The Analysis Of Auditor Opinion After Financial Crisis. International Conference On Economics, Education, Business And Accounting, 257–269. https://doi.org/10.18502/kss.v3i11.4011.

Deyganto, K. O. (2022). The Effect Of Tax Incentives Practices On The Sustainability Of Micro, Small And Medium Enterprises In Ethiopia During The Outbreak Of Corona Virus Pandemic. Journal of Innovation and Entrepreneurship, 11(8), 1–22. https://doi.org/https://doi.org/10.1186/s13731-022-00194-8.

Ernie, and Marcelino. (2021). Tax Incentives In Indonesia During The COVID-19 Pandemic. International Journal of Scientific and Research Publications, 11(5), 348–354.

Gajdosikova, D., Valaskova, K., and Durana, P. (2022). Earnings Management And Corporate Performance In The Scope Of Firm-Specific Features. Journal of Risk and Financial Management, 15, 426. https://doi.org/https:// doi.org/10.3390/jrfm15100426.

Ghofir, A., and Yusuf. (2020). Effect Of Firm Size And Leverage On Earning Management. Journal of Industrial Engineering and Management Research, 1(3), 218–225. https://doi.org/https://doi.org/10.7777/jiemar.

Hamzah, R. S., Gozali, E., and Khamisah, N. (2021). Earnings Management And Its Determinant (Study Of Listed Companies On Indonesia Stock Exchange). Akuntabilitas, 15(1), 89–102.

Hanifah. (2020). Analysis Of Accounting Conservatism In Minimizing Profit Management In Non-Banking State-Owned Enterprises (SOEs0 Listed on The IDX. International Journal of Business, Economics, and Law, 23(1), 1–10.

Hariasih, P., Setyobakti, M. H., and Juliasari, D. (2020). Financial Statements Based On Financial Accounting Standards For Entities Without Public Accountability. Progress Conference, 3(1), 76–82.

Hutauruk, M. R., Riyanto, A., and Putri, G. U. (2022). The Factors Impact On Earnings Management On Indonesia Mining Company. Jurnal Akuntansi, 26(3), 443–463. https://doi.org/http://dx.doi.org/10.24912/ja.v26i3.1067.

Iriyadi. (2019). Prevention Of Earnings Management Through Audit Committee And Audit Quality In The Award-Winning And Non-Winning Companies. Journal of Accounting Research, Organization and Economics, 2(2), 155–169.

Jiang, Y. (2020). Meanings, Motivations And Techniques Of Earnings Management. Proceedings of the 2020 3rd International Conference on Humanities Education and Social Sciences (ICHESS 2020), 141–146.

Jihadi, M., Vilantika, E., Hashemi, S. M., Arifin, Z., Bachtiar, Y., and Sholichah, F. (2021). The Effect Of Liquidity, Leverage, And Profitability On Firm Value: Empirical Evidence From Indonesia. Journal of Asian Finance, Economics and Business, 8(3), 0423–0431.

Kalu, A. O. U., Unachukwu, L. C., and Ibiam, O. (2018). Accessing Secondary Data, A Literature Review. Singaporean Journal of Business Economics and Management Studies, 6(6), 53–63. https://doi.org/10.12816/0048423.

Kjærland, F., Ane Tolnes, H., Søndergaard, A., and Vågslid, A. (2020). Corporate Governance And Earnings Management In A Nordic Perspective: Evidence From The Oslo Stock Exchange. Journal of Risk Financial Management, 13(11), 256. https://doi.org/https://doi.org/10.3390/jrfm13110256.

Krismiaji, and Sumayyah. (2022). Audit Quality, Audit Opinion, And Earnings Management: Indonesian Evidence. Journal of Business and Information Systems, 4(2), 103–113. https://doi.org/10.36067/jbis.v4i2.141.

Kuswara, C. S., and Yanto, E. (2019). The Influence Of Previous Audit Opinion, Audit Tenure And Liquidity Toward Going Concern Opinion In Manufacturing Companies For The Period Of 2015-2017. Journal of Applied Accounting and Finance, 3(1), 1–12.

Larhlid, A., McClintock, K., Gillham, J., Wilson, A., O’Donovan, N., Hacker, C., Naker, S., Glowacki, K., Laki, B., Radzikowski, B., Loretz, S., and Sögner., L. (2017). Effectiveness Of Tax Incentives For Venture Capital And Business Angels To Foster The Investment Of SMEs And Start-Ups. https://doi.org/Doi: 10.2778/51300.

Lazzem, S., and Jilani, F. (2018). The Impact Of Leverage On Accrual-Based Earnings Management: The Case Of Listed French Firms. Research in International Business and Finance, 44, 350–358. https://doi.org/https://doi.org/10.1016/j.ribaf.2017.07.103.

Li, F., Z., and Thibodeau, C. (2019). CSR-Contingent Executive Compensation Incentive And Earnings Management. Sustainability, 11(12), 1–2. https://doi.org/https://doi.org/10.3390/su11123421.

Lu, B. (2020). Literature Review Of Audit Opinion. Modern Economy, 11, 28–36. https://doi.org/https://doi.org/10.4236/me.2020.111004.

Manjunatha, N. (2019). Descriptive Research. Journal of Emerging Technologies and Innovative Research, 6(6), 863–867.

Maqfiroh, U., and Mauliyah, N. I. (2022). Effect Of Profit Management On Company Performance. Journal of Academic Research and Science, 7(1), 24–34.

Marantika, A., Djatmiko, B., Jatiningrum, C., and Purwohandoko. (2021). The Motivation Of Earnings Management Practices In Indonesia Companies: Board Of Directors Perspective. Psychology and Education, 58(1), 5075–5087.

Marlinah, L., and Syahribulan. (2020). The Role Of Government-Borne Tax Incentives In The Covid-19 Pandemic Era. Economy Deposit Journal, 2(2), 58–66.

Michelon, G., Sealy, R., and Trojanowski, G. (2020). Understanding Research Findings And Evidence On Corporate Reporting: An Independent Literature Review. The Financial Reporting Council.

Minanari, and Rahayu, A. (2019). The Effect Of Profit Management, Good Corporate Governance Mechanism, And Investment Decisions On Firm Value. 4th International Conference on Management, Economics and Business (ICMEB 2019), 258–263.

Nalarreason, K. M., Sutrisno, T., and Mardiati, E. (2019). Impact Of Leverage And Firm Size On Earnings Management In Indonesia. International Journal of Multicultural and Multireligious Understanding, 6(1), 19–24.

Okafor, Gloria, T., Ezeagba, Emenike, C., and Innocent, O. (2018). Effect Of Earnings Management On Performance Of Corporate Organisation In Nigeria. International Journal of Business Management and Economic Review, 1(3), 88–101.

Osadchy, E. A., Akhmetshin, E. M., Amirova, E. F., Bochkareva, T. N., Gazizyanova, Y. Y., and Yumashev, A. V. (2018). Financial Statements Of A Company As An Information Base For Decision-Making In A Transforming Economy. European Research Studies Journal, 21(2), 339–350.

Patel, M., and Patel, N. (2019). Exploring Research Methodology: Review Article. Journal of Research and Review, 6(3), 48–55.

Sánchez-Ballesta, J., and Yagüe, J. (2020). Financial Reporting Incentives, Earnings Management, And Tax Avoidance In SMEs. Journal of Business Finance and Accounting, 48(7–8), 1404–1433. https://doi.org/https://doi.org/10.1111/jbfa.12519.

Santoso, A. (2023). The Effect Of Free Cash Flow And Leverage On Earnings Management: Moderating Role Of Good Corporate Governance. Asian Management and Business Review, 3(1), 14–23.

Shen, H., Fu, M., Pan, H., Yu, Z., and Chen, Y. (2020). The Impact Of The COVID-19 Pandemic On Firm Performance. Emerging Markets Finance and Trade, 56(10), 2213–2230. https://doi.org/https://doi.org/10.1080/1540496X.2020.178 5863.

Simamora, A. J. (2019). Earnings Management And Future Earnings. Jurnal Akuntansi Dan Keuangan Indonesia, 16(2), 141–164.

Siregar, R. A., and Patunru, A. (2021). The Impact Of Tax Incentives On Foreign Direct Investment In Indonesia. Journal of Accounting Auditing and Business, 4(1), 66–80.

Strakova, L. (2021). Motives And Techniques Of Earnings Management Used In A Global Environment. SHS Web of Conferences 92, 02060. Globalization and Its Socio-Economic Consequences 2020. https://doi.org/https://doi.org/10.1051/shsconf/20219202060.

Sultana, E., Ghosh, R., and Sen, K. K. (2021). Impact Of COVID-19 Pandemic On Financial Reporting And Disclosure Practices: Empirical Evidence From Bangladesh. Asian Journal of Economics and Banking, 6(1), 122–139.

Sumaryati, A., Hasanatina, F. H., and Fanny. (2021). The Impact of Financial Performance and Audit Opinions: An Indonesian Case Study. 2nd International Conference on Industry 4.0 and Artificial Intelligence (ICIAI 2021), 122–126.

Susanto, Y. K., Pradipta, A., and Esther., S. (2021). Audit Decision: Interaction Between Earnings Management And Audit Specialization. Academy of Accounting and Financial Studies Journal, 25(1), 1–8.

Taqi, M., Khan, R., and Anwar, I. (2020). Financial Leverage And Profitability: Evidence From Oil And Gas Sector Of India. GIS Business, 15(4), 665–687.

Thi, H. N. D., and Thi, H. D. (2022). A Quality Financial Report: A Conceptual Analysis. International Journal of Research in Vocational Studies, 2(1), 26–32. https://doi.org/prefix: 10.53893.

Tibiletti, V., Marchini, P. L., and Bertacchini, F. (2021). The Effects Of Covid-19 On Financial Statements: Some Insights From Italy Through An International Literature Review. Universal Journal of Accounting and Finance, 9(5), 1033–1048. https://doi.org/10.13189/ujaf.2021.090514.

Tifanny, D., and Wijaya, H. (2020). The Effect Of Corporate Governance On Earnings Management. Jurnal Manajemen Bisnis, 23(1), 72–85.

Utami, F. L., Putra, Y. M., Tanjung, P. R. S., and Nugroho, L. (2020). Analysis Of Audit Opinion Of Financial Statements From State Institutions: Indonesia Empirical Study, Period 2012-2017. International Journal of Financial Research, 11(5), 150–160.

Wardani, D. K. (2019). Leverage As A Moderator Of The Effect Of Tax Planning On Profit Management (Empirical Study Of Property And Real Estate Companies On The Kompas 100 Indexed IDX, 2014-2017). Jurnal Akuntansi Pajak Dewantara, 1(1).

Widarti, S., and Pramajaya, J. (2018). The Effect Of Profit Management On Company Performance. International Journal of Academic Research in Economics and Management Sciences, 7(4), 44–63. https://doi.org/http://dx.doi.org/10.6007/IJAREMS/v7-i4/4831.