Determinant Analysis of the Quality of Company Financial Reports in East Kalimantan, Indonesia
Mat Juri a, La Ode Hasiara a,2*, Noor Fachman Tjetje a, Muhammad Suyudi a
a Politeknik Negeri Samarinda, Indonesia
* corresponding author
I. Introduction
The title above can identify variables that impact the quality of financial reports, namely exogenous variables that affect endogenous variables. Exogenous variables include Mana¬gement Commitment (MC), Human Capital (HC), Accounting Standard (SA), Accounting Knowledge (AK), and Communication Quality (CQ) on endogenous variables, namely the Quality of Financial Reports (QFR) (Imbiri, 2014). The problem identification results are followed by identifying variables that have a positive and negative impact on the problem [2]
. Therefore, this study is essential because its purpose is to solve the existing problems [3]. This issue is a phenomenon in this study. Even during the Pandemic-19, the company's activities remain normal [4].
The exogenous variable indicators of human capital include skills gained from various sources, such as length of employment, work experience, number of training, number of workshops attended, and number of courses taken. Furthermore, the exogenous variable indicators of accounting Knowledge is the compatibility of work with knowledge and skills, such as accounting courses, academic accounting conferences, accounting training, and accounting seminars. Four indicators are the main concerns impacting the endogenous variable: the Quality of Financial Reporting (QFR). The quality of financial statements [5] and [6] is the result of the process of accounting activities, which are prepared with various characteristics, such as financial reports that can be understood, which means that users easily understand them. Relevant means that it must be in line with the company's objectives. In contrast, materiality means that it must not provide information that interferes with economic decisions due to the influence of materiality.
Reliable on the information provided, free of misleading interpretations, and truthful in presenting transactions and other events that must be included in financial reports [7]. Users of financial reports are considered to have a complete understanding of an entity's economic and business activities [8].
However, complex information should be included in financial reports so that it is easy to understand [9]. Appropriate and helpful decision-making information [10]. Information has the potential to influence economic decisions and can be used to view past, present, and future economic events [11].
Users of financial reports can be compared from one period to the next [12]. This is because the company's financial statements, released at the end of each year, contain information about the
ARTICLE INFO A B S T R A C T
Article history:
Received 30 Sep 2022 Revised 06 Nov 2022 Accepted 13 Dec 2022
The objectives of this study were to establish Management Commitment (MC), human capital, knowledge, honesty, and communication, either directly or indirectly. This study used a quantitative approach with a Structural Equation Modeling (SEM) model. The results of this study showed that: 1) Mana¬gement Commitment, accounting standards, and human capital has a positive and significant im¬pact on the quality of financial reports, 2) Accounting knowledge, Management Commitment, and human capital have a significant positive impact on the quality of communication, 3) Accounting know¬¬ledge and communication does not affect the quality of financial reports, 4) Human capital does not affect the quality of communication. It was concluded that Management Commitment, human capital, and accounting knowledge dominate the quality of the financial reports.
Copyright © 2023 International Journal of Artificial Intelegence Research.
All rights reserved.
Keywords:
Company, Determinant,
Quality of Financial Reports
company's results. [13]. It provides a structured summary of financial transactions to provide information about a company's assets, liabilities, and equity [14]. An indication of quality financial reports is when they provide complete and valuable financial information to the company's management as a basis for decision-making.
Based on previous research on Management Commitment (MC), for example, Hadi et al. (2020) explain that MC is an indicator of trust in the organization's values and goals, as well as a desire to remain a member of the organization. Meanwhile, Pontian (2019) and Hadi et al. (2020) define commitment as an attitude reflected in the individual who becomes loyal, obedient, and committed to his or her organization. Management Commitment reflects someone close to the organization [17].
Pontian (2019) describes Management Commitment as a form of employee loyalty in the company where he or she works because Management Commitment affects the system designed for organizational improvement. At the same time, the commitment of top management is required to form the foundation for implementing a management system. Management can impose the system on all parties in the organization. Commitment is an individual's orientation towards the organization, which includes loyalty, identification, and involvement in the organization. Therefore, the most fundamental Management Commitment is a relationship orientation, which causes individuals to be willing to give something that can reflect the achievement of organizational goals [18].
Accounting Standards based on research conducted by Zohri & Chouaib (2013) and [10] are benchmarks for the quality of financial reports if the preparation of financial reports is based on standards. Professional organizations in Indonesia have issued standards for the quality of financial reports [4]. This is recommended because it is related to the quality of a company's financial reports.
Various financial reporting standards have been published in Indonesia [12]. This is done because it impacts the standards of each type of company. Thus, the current financial reporting standards in Indonesia vary greatly depending on the type of company. For example, a public company preparing financial reports must adhere to the International Financial Reporting Standards (IFRS).
On the other hand, it must use Entities Without Public Accountability (ETAP). The Accounting standards used are Micro, Small, and Medium Enterprise (MSME) Special Accounting Standards for companies that are included in the category of small companies. There are now additions to various types of Standards, such as Islamic Banking Accounting Standards and Islamic Boarding School Fund Management Accounting Standards. This condition is Indonesia's commitment through the Indonesian Institute of Accountants' Management. Indonesia's International Financial Reporting Standards (IFRS) prioritizes Indonesian business stakeholders (Ong, 2018). Because business actors are responsible to the public. Regulations realize the infrastructure needed by the community, such as capital market transactions as users of financial information [19]. The quality of financial reports boosts the confidence of financial report users.
Human capital can be carried out correctly and adequately if human capital is used correctly [20].
Therefore, [21] states that human capital is the organization's first and most important asset. Human capital includes the power of thought, material resources, and existing theoretical resources [20].
Human capital is the ability to organize and attach to an organization to achieve organizational goals [22]. The ability of the staff is seen from the skills possessed. The company's ultimate goal is to achieve maximum profit [23].
Meanwhile (HC) is the first and primary capital for companies to achieve performance [20].
Human capital is the ability owned and attached to employees in an organization to carry out functions and responsibilities in the company [21]. The staff's ability can be seen from the skills possessed to achieve its performance. This performance can produce (output) and final results aligned with the organization's goals [18]. Meanwhile, human capital is an ability related to knowledge, skills, abilities, and characteristics that are inherent in a person's personality and impact company performance [20].
Accounting knowledge is decisive in producing quality financial reports [24]. Furthermore, knowledge of financial management impacts the company's success [25]. Accounting knowledge is one of them [24]. Because the word Accounting can be developed more broadly, rather than just the word accounting, the word Accounting has a more full and broad meaning. For example, (a) financial figures must be managed carefully; otherwise, they will impact the company's losses; (b) The decisions taken must be considered carefully in determining strategic policies. If you make a mistake
in deciding on a policy, it will impact the company's losses; (c) Money is a medium of exchange that companies can develop.
On the other hand, money can harm the company if not appropriately managed; (d) The value of money must be managed carefully because money has a value that is useful and beneficial for increasing the value of the company; (e) Financial transactions must be managed carefully; otherwise, it will have an impact on the company's losses; (f) Good financial analysis must be carried out in all aspects. The company's finances must be managed and analyzed carefully and thoroughly, so those users who obtain financial information are not hoaxes; (g) Neutrality is the impartiality of one of the parties involved. So, if you are the manager of a company, you must be neutral, not taking sides with any party except for the company's general interest; (h) Information systems must be appropriately managed; if it is adequately managed, they can provide helpful information for making economic decisions. Quality financial reports, if they can provide relevant information to users of these financial reports. Based on the statements above, it can be concluded that Accounting is an abbreviation, and its abbreviations are figures, decisions, money, values, transactions, analyses, neutrals, systems, and information provided to users must be clear, mainly information on corporate finance [26].
Aside from that, the quality of communication among company employees fosters communication with the community, particularly traditional leaders and religious leaders, as well as the government [27]. The company has been established so far and includes communication with local governments, traditional leaders, local community leaders, LSM, and youth organizations in the district where the company is located. The company's communication relationships with various elements of society positively impact its survival [28]. After the authors observed directly, it turned out that one thing that makes a company run everlastingly is to build intense communication with various elements of society so that all company problems can be adequately handled. There is no option but to establish strong communication [28], and [27]. As per the survey results, the company has built communication in various elements of society, allowing it to remain active in its operational activities. The company in Sangatta is everyone's dream. This strategy is a good and safe way to keep the company's operations running smoothly. Communication relationships must be maintained in order for the company to survive. Communication is maintained continuously and carried out in all circles [29].
Communication is built from the general public around the company environment, traditional leaders, religious leaders, youth organizations, and Community Social Institutions (LSM). According to [28], Good communication must be built as a whole and integrated rather than separately..
II. Methods
This study applied a quantitative approach with the Structural Equation Modeling (SEM) model. [40] and [41] explains that Structural Equation Modeling (SEM) is appropriate as one of the models used by researchers to achieve research objectives [41]. The method is a way to determine the goals to be achieved in this research [42]. In order to collect data for this study, the authors distributed questionnaires to the community within the company's environment, in the front ring category, and then to people outside the company's environment, who are included in the district where the company is located. [43]. PT Kaltim Prima Coal in Sangatta, PT Pupuk Kalimantan Timur, PT LNG located in Bontang. Most of the questionnaires of this study were distributed to these companies. The questionnaires distributed in this study were 525 pairs.
However, 493 questionnaires, or approximately 93.90 percent, were returned. Because the percentage of returns is 93.90 percent, the results of this questionnaire were excellent [44].
According to the explanation above, the conceptual framework in this study is shown in Figure 1.
Fig. 1. Study Conceptual Framework .
III. Result and Discussion
A. Descritive statistics
The data used in this research was through Google Forms, as many as 525 pairs of questionnaires.
The data was collected for almost two years, from 2019 to 2021. The first questionnaire was distributed from March 2019 to September 2019. However, the data collected was relatively small, so the second questionnaire was distributed from December 2019 to July 2021. The data that has been collected and is ready to be processed were 493 respondents. The data that have been collected are 493 respondents. So the percentage of questionnaires collected is 493:525 x 100 = 93.90 percent. At the time of further analysis, the validity and reliability of the instrument are first checked. Instrument validity is a measure of the effectiveness and efficiency of the instrument. A tool is considered valid if it can measure precisely what it is trying to measure [42]. By comparing the correlation index, the instrument as a measuring tool determines the data's validity and reliability level [42].
Suppose a device can be considered valid if the value of the correlation coefficient is positive and more significant than 0.3. The device cannot be considered valid if the correlation value is less than 0.3.[42]. The level of stability and accuracy of the tools used is demonstrated by reliability testing.
This test determines how consistently the respondent is filling in the questionnaire continuously. The reliability of the test equipment used in this study is an absolute requirement [40]. The Cronbach’s Alpha coefficient was used to accomplish the reliability test. The device is said to be reliable if Cronbach’s Alpha coefficient is more significant than 0.6. The results of the validity and reliability tests that can be seen based on the results of statistical tests, i.e., tests for validity and reliability, are presented in table 1.
Table 1. List of Data Validity and Reliability Test Results
Variable Cronbach's Alpha
(Coefficient alpha)
Indicator Corrected Item-Total Correlation
Management Commitment (MC) 0.651 X1.1 0.425
X1.2 0.490
X1.3 0.402
X1.4 0.436
Accounting Standard (AS) 0.648 X2.1 0.394
X2.2 0.503
X2.3 0.459
X2.4 0.390
Human Capital (HC) 0.665 X3.1 0.382
X3.2 0.447
X3.3 0.493
X3.4 0.473
Accounting Knowledge (AK) 0.777 X4.1 0.620
X4.2 0.658
X4.3 0.568
X4.4 0.508
Communication Quality (CQ) 0.786 Y1.1 0.667
Y1.2 0.655
Y1.3 0.575
Y1.4 0.501
Quality of Financial Reporting (QFR) 0.785 Y2.1 0.534
Y2.2 0.589
Y2.3 0.526
Y2.4 0.577
Y2.5 0.606
The results of the validity and reliability tests are shown in the adjustment column for the total item correlation in Table 1. The correlation coefficient for each measure is more significant than 0.30. This test verifies that the device's validity has been met, according to the results of Cronbach's Alpha coefficient testing for dependability. Cronbach's Alpha for the latent variable is more than 0.6, indicating that the reliability criteria have been met. On the basis of the outcomes of validity and reliability testing, it was determined that this study met the criteria for validity and reliability. After the prerequisites of validity and dependability have been met, a hypothetical model version will be created. Before testing and another modeling, it is vital to guarantee that residuals are close to zero and that the resulting covariance frequency distribution is symmetric. The double residual value may be at most 5%. If residuals exceed 5%, residual covariates generated by the model must be considered.
Also, if the model's residual value is sufficiently large. (>2.58), one alternative modification is to add a new path to the estimated model. A significance criterion of 2.58 might be used to evaluate the relevance of the residual.
The Management Commitment value in table 1 indicates that Cronbach's Alpha coefficient is 0.651%. The Cronbach's Alpha coefficient is more than the needed upper threshold, as determined by its value. [40], [42]. Furthermore, the accounting standard (SA) shows Cronbach's Alpha value of 0.648. This score has met the requirements recommended by statisticians. Then, Human Capital (HC) shows Cronbach's Alpha Coefficient Values 0.665. The value is greater than the required threshold.
This value has exceeded the required value, so the three coefficient values described above indicate that the reliability value obtained is greater than the required threshold [45].
Then, The Cronbach’s Alpha Coefficient for Accounting Knowledge (AK) is 0.777. Because the minimum requirement is 0.60, this value fulfills the conditions for fulfilling the reliability of Accounting Knowledge. Furthermore, Cronbach's Alpha Coefficient for communication (QC) is 0.786. This value falls within the recommended threshold [46][40]. Because Cronbach's Alpha Coefficient has a minimum value of 0.60. Finally, Cronbach's Alpha Coefficient of 0.785 is the value of the Alpha Coefficient of Financial Report Quality (QFR). This value is higher than the recommended threshold (Sugiyono, 2019; Hartono, 2018). Because 0.60 is the lower limit. According to the explanation, it is concluded that based on exogenous variables, namely Management Commitment (MC), Accounting Standards (SA), human capital (Hc), Accounting Knowledge (AK), and indirect variables, namely Communication Quality (CQ) has no impact on the endogenous variable, namely the Quality of Financial Reports (QFR). The complete SEM model is shown below.
The results of the tests are shown in table 2
Table 2. The goodness of fit full model
Cut-off Value Model Result Information Chi-Square 159.113 df = 190 337.901 Not Good Fit Significant Probability ≥ 0.05 0.000 Not Good Fit
GFI ≥ 0.90 0.950 Good Fit
RMS ≤ 0.08 0.040 Close Fit
AGFA ≥ 0.90 0.915 Good Fit
TLI ≥ 0.90 0.966 Good Fit
NFI ≥ 0.90 0.953 Good Fit
CFI ≥ 0.90 0.979 Good Fit
CMIN/DF ≤ 2.0 1.778 Good Fit
Table 3 shows that the quality of the fitting model values based on GFI, RMSEA, AGFI, TLI, NFI, CFI, and CMIN/DF has met the Good Fit criteria. While the Chi-Square and Significant Probability values show, the model is not good. However, adhering to the parsimony principle, from a variety of goodness-of-fit measures and the Standardized residual covariance matrix, it is shown that the model already meets the Good Fit criteria. Thus, based on the goodness of the fit test, it can be concluded that the model has met the criteria. The following is the path coefficient of the SEM Model, which can be seen in Figure 2.
Fig. 2. Full Coefficient SEM Model
Figure 2 shows the coefficients of the full SEM model and the degree of influence of each variable explained below, as shown by the full SEM direct affect test results. Table 3 contains the test results.
Table 3. The goodness of fit full model
Direct Effect Estimate SE. CR. P Label
Y1 X1 0.261 0.07 3.710 *** par_1
Y1 X2 -0.078 0.064 -1.213 0.225 par_2
Y1 X3 0.116 0.061 1.900 0.045 par_3
Y1 X4 0.49 0.073 6.707 *** par_4
Y2 Y1 -0.101 0.068 -1.488 0.137 par_5
Y2 X1 0.484 0.086 5.633 *** par_6
Y2 X2 0.232 0.071 3.250 0.001 par_7
Y2 X3 0.524 0.085 6.170 *** par_8
Y2 X4 0.099 0.073 1.362 0.173 par_9
X1.4 X1 1
X1.3 X1 0.855 0.058 14.718 *** par_10
X1.2 X1 0.902 0.053 16.899 *** par_11
X1.1 X1 0.851 0.069 12.315 *** par_12
X2.4 X2 1
X2.3 X2 0.775 0.09 8.576 *** par_13
X2.2 X2 0.837 0.097 8.667 *** par_14
X2.1 X2 1.209 0.134 9.011 *** par_15
The allegation is verified by comparing the CR value in table 3 to the t value, which is 1.96, at a significance level of p 0 > 0.05. Then, the offered hypothesis was rejected. Additionally, the impact of Management Commitment to communication, the impact of Management Commitment (MC) on the quality of annual financial reports (QFR), the impact of Accounting Standards (SA) on the quality of communication (QC), the impact of accounting standards (SA) on the quality of annual financial statements (QFR), the impact of accounting standards (SA) on the quality of financial statements (QFR), the impact of capital (HC) on the quality of financial statements (QFR), and the impact of accounting standards (QFR). The description of each verified hypothesis is predicated on the test (see table 4)
Table 4. The Results of Hypothesis Verification
The Results of Hypothesis Verification Path Path Coefficient CR p-value H1. (MC) has a significant impact on (QFR). X1→ Y2 0.484 5.633 <0.001 H2.(MC) has a significant impact on (QC) X1→ Y1 0.261 3.710 <0.001 H3. (SA) has no a significant impact on (QC) X2→ Y1 -0.078 -1.213 0.225 H4. (SA) has a significant impact on (QFR). X2→ Y2 0.232 3.250 <0.001 H5. (HC) has a significant impact on (QC) X3→ Y1 0.116 1.900 <0.045 H6. (HC) has a significant impact on (QFR). X3→ Y2 0.524 6.170 <0.001 H7. (AK) has a significant impact on (QC) X4→ Y1 0.490 6.707 <0.001 H8. (AK) has no significant impact on (QFR). X4→ Y2 0.099 1.362 <0.173 H9. (QC) has no significant impact on (QFR). Y1→ Y2 -0.101 -1.488 0.137
H1 is subject to testing Table 4 presents the findings of hypothesis verification. The impact of Management Commitment (MC) on the quality of financial reports (QFR) is demonstrated to have a path coefficient of 0.484 with a CR value of 5.633 and a p-value of 0.001 (p 0.05). This test demonstrates that Management Commitment (MC) considerably affects the Quality of Financial Reports (QFR). The positive path coefficient indicates that an increase in Management Commitment (MC) can immediately enhance financial report quality (QFR). The outcomes of the hypothesis tests are elaborated upon in the following sections
First hypothesis. The quality of financial information is positively and significantly affected by management commitments (MC) (QFR). Studies (Poncian, 2019; Hadi et al., 2020) have shown that Management Commitment (MC) has a substantial impact on the quality of financial reports (QFR).
The second hypothesis. Management Commitment (MC) has a favorable and substantial effect on Communication Quality (QC). It has a CR value of 3,261 and a path coefficient of 0.261. Then p value
< 0.001 (p <0.05). This test considerably impacts the Management Commitment (MC) variable when Communication Quality is considered (CQ). The path coefficient is positive and statistically
X3.1 X3 1
X3.2 X3 1.198 0.147 8.122 *** par_16
X3.3 X3 1.156 0.137 8.442 *** par_17
X3.4 X3 1.085 0.14 7.774 *** par_18
X4.4 X4 1
X4.3 X4 1.012 0.089 11.312 *** par_19
X4.2 - X4 1.127 0.089 12.592 *** par_20
X4.1 X4 1.028 0.084 12.299 *** par_21
Y2.1 Y2 1
Y2.2 Y2 0.953 0.06 15.89 *** par_22
Y2.3 Y2 0.989 0.049 20.351 *** par_23
Y2.4 Y2 1.126 0.069 16.263 *** par_24
Y2.5 Y2 1.237 0.102 12.124 *** par_25
Y1.4 Y1 1
Y1.3 Y1 1.198 0.1 12.038 *** par_26
Y1.2 Y1 1.2 0.095 12.571 *** par_27
Y1.1 Y1 1.211 0.095 12.738 *** par_28
significant, indicating that the commitment of management (MC) has a direct positive and statistically significant effect on enhancing communication quality (QC). It has been demonstrated that organizational commitment (MC) has a favorable and substantial effect on communication quality (Qc). It is confirmed by the findings of studies conducted by [30][17], indicating that Management commitment (MC) has a positive and significant effect on communication quality (CQ).
The third hypothesis. Accounting Knowledge (AK) does not have a positive and significant impact on Communication Quality (CQ) because the path coefficient has a value of -0.078 with a CR value
= -1.213, then p value > 0.225 (p > 0.05). This test proved that there is no significant impact between Accounting Knowledge (AK) and Communication Quality (CQ). The negative path coefficient proves that an increase in Accounting Standards (SA) has no direct impact on improving the Quality of Communication (QC). Thus, the third hypothesis shows that Accounting Knowledge (AK) has not had a positive and significant impact on Communication Quality (CQ). The results of this study are not yet consistent with the results of a study conducted by [4][48], which reveals that Accounting Standards (SA) have a positive and significant impact on the quality of communication (Qc).
Test the fourth hypothesis. This indicates that the impact of accounting standards (SA) on financial reporting quality (QFR) is equal to a value of CR = 3.250 and p < 0.001 (p<0.05). This test demonstrates that accounting rules have a favorable and significant effect on financial reporting quality (QFR). Positive pathway variables indicate that advances in accounting standards (SA) have a direct, positive, and significant effect on enhancing financial reporting quality (QFR). Therefore, Accounting Standards (SA) has a favorable and considerable impact on the quality of financial reporting, per the fourth hypothesis (QFR). This study's findings are consistent with those of [49], which concluded that Accounting Standards have a favorable and substantial impact on the quality of financial reports.
The verification of the fifth hypothesis. It shows that the impact of human capital on the Quality of Communication (QC) has a path ratio of 0.116 with a CR value of 1900 and a p-value < 0.045 (p <
0.05). This test significantly impacts human capital and Communication Quality (CQ). The positive path indicator proves that an increase in human capital directly impacts improving the Quality of Communication (QC). Thus, the fifth hypothesis is that human capital positively and significantly impacts Communication Quality (CQ). The findings of this study are corroborated by the findings of [20], who found that Human Capital (HC) has a positive and substantial effect on Communication Quality (CQ).
Sixth hypothesis verification. Human capital has a positive and statistically significant influence on the quality of financial reports (QFR) since the path coefficient value is 0.524 with a CR value of 6,170 and a p-value of less than 0.001 (p 0.050). This test demonstrates a correlation between Human Capital (HC) and Financial Report Quality (QFR). The positive path coefficient demonstrates that increased human capital can immediately improve Financial Report Quality (QFR). Thus, the sixth hypothesis demonstrates that human capital has a positive and statistically significant influence on the Quality of Financial Reports (QFR). According to the findings of [18][20], the quality of human capital has a favorable and significant effect on the quality of financial reports (QFR).
Seventh hypothesis verification. It indicates that the relationship between Accounting Knowledge (AK) and Communication Quality (CQ) has a path coefficient of 0.49, a CR value of 6.707, and a p- value of less than 0.001 (p 0.05). This data demonstrates that Accounting Knowledge (AK) has a favorable and substantial effect on Communication Quality (CQ). Positive path indicators demonstrate that the rise in Accounting Knowledge (AK) directly affects the rise in Communication Quality (QC).
Thus, the seventh hypothesis demonstrates that Accounting Knowledge (AK) has a positive and statistically significant influence on Communication Quality (CQ). The results of this study are further confirmed by the findings of [15], which demonstrate that Accounting Knowledge (AK) has a positive and statistically significant effect on Communication Quality (CQ).
The verification of the eighth hypothesis. It shows the impact of Accounting Knowledge (AK) on the Quality of Financial Reports (QFR), with a path coefficient of 0.099 and CR value = 1.362, and p-value> 0.173 (p > 0.05). This evidence indicates that Accounting Knowledge (AK) has no substantial effect on the quality of financial reports (QFR). The coefficient is positive. However, it does not affect Accounting Knowledge (AK) or the quality of financial reports (QFR). Therefore, the eighth hypothesis regarding the quality of financial reports (QFR) has yet to be confirmed, stating that accounting expertise does not affect QFR (QFR). This study's findings contradict those of [4], which
concluded that accounting knowledge has a favorable and significant influence on the quality of financial reports (QFR).
The verification of the ninth hypothesis. It shows that the impact of Communication Quality (CQ) with financial report quality (QFR) has a path coefficient of 1.101, with CR = 1.488 and p-value>
0.137 (p > 0.05). This evidence shows no significant impact of the Quality of Communication (QC) on the Quality of Financial Reports (QFR). Because the path coefficient is negative, there is no impact between the Quality of Communication (QC) and the Quality of Financial Reports (QFR). So that the ninth hypothesis has yet to be proven that the Quality of Communication (QC) impacts the quality of financial reports. The results of this study are different from the results of a study conducted by [12], which explains that the Quality of Communication (QC) does not have a significant impact on the quality of financial reporting (QFR). Furthermore, Table 5 shows the results of showing the impact of exogenous variables on endogenous variables.
Table 5. List of Indirect Impacts of Exogenous Variables on Endogenous Variables Path Indirect Impact Total Impact
X1 → Y1 → Y2 -0.026 0.457
X2 → Y1 → Y2 0.008 0.239
X3 → Y1 → Y2 -0.012 0.512
X4 → Y1 → Y2 -0.05 0.051
Based on the results of testing the indirect impact and total impact in Table 5, it can be seen that the first highest total impact is found on the (SA) (CQ) (QFR) path, with a total impact coefficient of 0.512. According to a study conducted by (Ong, 2018), Accounting Standards have a favorable and significant impact on the quality of financial reports. These findings are consistent with these findings.
On the basis of this test, it has been demonstrated that of the four indirect impact paths, the path (SA) (CQ) (QFR) is the most dominant, or in other words, the quality of financial reports (QFR) is most influenced by Accounting Knowledge (AK), where an increase in Accounting Knowledge (AK) has a positive and significant impact on improving the Quality of Financial Reports (QFR), either directly or indirectly. The results of this investigation are still consistent with those of a previous study [4].
Moreover, Management Commitment (MC) has the second biggest overall path influence on Communication Quality (CQ), with an overall exposure factor of 0.457%. This study's findings are consistent with those of a previous study [29] which concluded that Management Commitment has a positive and significant effect on communication quality. The accounting standard path (SA) does not affect communication quality (QC). However, Accounting Standards affect the Quality of Financial Reports (QFR). Accounting Standards have a favorable and considerable impact on the quality of financial reports, according to the findings of a study by [29]. With an overall exposure factor of 0.051, Accounting Knowledge (AK) was found to have a positive and substantial impact on the Quality of Communication (QC) and quality of financial reports (QFR). The findings of this study contradict the findings of [29], who found that the quality of communication has a favorable and significant impact on the quality of financial reporting
IV. Conclusion
Based on the results of this study, it can be concluded that, in general, Human Capital (HC), Board of Directors Commitment (DC), Accounting Knowledge (AK), Management Commitment (MC), and Accounting Standards (SA) have a significant influence on the Quality of Financial Statements (QFR) and Communication Quality (QC). However, there are some exceptions, such as Accounting Knowledge (AK) Quality of Communication to Quality of Financial Statements (QFR) and Accounting Standards to Quality of Communication (QC).
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