One of the motives is a bonus (Gugus & Nurlita, 2019), so management uses different ways to do earnings management. In this study, the variable expertise of the director was used; the board of directors has a daily basis to make the right decisions for the sustainability of the company. When considering data as late as 2020-2021, the state of the global pandemic effect in Indonesia is taken into account, which will have a significant impact on the earnings management component.
To consistently reach the level of a performance entitled to bonuses, the director plays with the size of the accounting numbers in the financial statements so that the bonus is always earned every year (Watts & Zimmerman, 1990). Earnings management is a policy on financial reporting that abuses some of the contract's shortcomings, stakeholders' limited rationality and information asymmetry in the market through some economic decisions, changes in accounting treatment or other methods. Where the service fee for the audit of financial statements is too low, this may present a threat in the form of vested interests that have the potential to cause non-compliance with the ethical code of the accounting profession so that audit fees reflect high auditor independence ( IAPI, 2016).
One of the determinants of cognitive abilities and decision-making abilities is the level of education (Muhammad & Pribadi, 2020). Auditing will see the fairness of the financial statements that are presented with Financial Accounting Standards (FAS) and then presented to external users. 115 One of the reasons for the misrepresentation of accounting information is due to the tendency of earnings manipulation in the form of earnings management by management so that another party (auditor) is needed to bridge the two different interests (Lubis & . Dewi, 2020 ).
For a company, the presentation of financial statements is one of the responsibilities of top management, namely the director.
Results and discussions 1 Descriptive statistics
A model selection test was performed to determine which of the three models above is best used in this study. Chi-square value for the estimated results of the Hausman test in table 4.6 is 0.8113 > 0.05, so the random effect is better than the fixed effect. It can therefore be concluded that the approach using the Common Effect model is better than the Random Effect.
Based on table 4.8, it can be seen that the value of the correlation coefficient between the independent variables is < 0.8; it can be concluded that there is no multicollinearity between any independent variable in this study. The chi-square of Obs*R_Squared is 0.0243, which is less than 0.05, so it can be concluded that the model in this study has a heteroscedasticity violation. The output table shows that the acquisition of the probable value of sales growth of 0.0166 < 0.05 with a negative regression coefficient.
The results of this study are certainly very contrary to the positive accounting theory (Watts & Zimmerman, 1990) in which according to this theory the director will manage the size of the accounting figures in the financial statements so that the bonus will always be earned every year. In addition, this inefficient result may occur because the Ministry of State-Owned Enterprises has repeatedly changed the composition of the board of directors so that the new director does not yet have stock bonuses or stock options. The sample companies mostly implemented only the MSOP program at the time of the IPO.
The use of inaccurate data may also cause the rejection of the hypothesis in this study. This unaffected result is likely due to this study's imprecise calculation of the audit fee. The audit fee in this study is measured using the natural log of the nominal audit fee.
The complexity of the services provided and the level of expertise must be different for each type of business. In addition, the rejection of the hypothesis in this study may also be caused by the lack of a control variable to see if the KAP is a big four, so the number of audit fees provided by the company may not reflect the quality of the actual auditor's report. This problem, of course, is caused not only by the weaknesses inherent in the management concept, but also by the moral hazard of the people who use it.
However, to be able to provide stronger results, it is hoped that future researchers could use control variables, namely the characteristics of the principals (including the length of time they have worked together and the principal's work background previous). Sales growth only describes the achievements of past period investments and can be used as a measure of future growth.
Conclusion, Implication, and Limitation 1 Conclusion
So that there are no high brokerage costs for companies with high turnover growth, but this is excluded for companies with abnormal turnover growth. Companies with abnormal revenue growth may have higher agency costs because they need to monitor more details about their revenue growth. In addition, revenue growth has proven unable to dampen executive compensation, audit fees, and executives' expertise in earnings management, as there are still many ways management uses earnings management.
Sales growth only describes the investment achievements of the past period and can be used as a measure of future growth, so that directors do not play with profit numbers for their own interests. The results of this study have important implications for the establishment of informal control over the action that directors will take through the perspective of religiosity in influencing the behavior and decisions that directors will make. The director appointed by the Ministry of State Companies went through the stages of selection and careful consideration, so we can conclude that the company was run by people who are competent in their fields.
Yet this opportunistic problem does not occur because there are no regulations governing all actions by the directors, but because of ethical and moral deviations of the people who use them. Religiosity is an essential factor as an informal control tool to scrutinize every decision made by the directors. There are several limitations in this study that require further research, the first of which is that the rejected hypothesis is most likely due to the small number of samples.
It is therefore recommended that further researchers conduct a re-examination with loose sample criteria or use other types of samples; besides, state-owned companies have very strong government interference, so this study has limitations in measuring earnings management. Then, future researchers are advised to conduct research using the variable of religiosity to provide empirical evidence on whether or not the variable can suppress earnings management practices. Moreover, it is hoped that further researchers will investigate the compensation of the CEO and CFO compensation only because the director is the one who is more responsible for the financial reporting of a company so that it will get better results.
Retrieved March 18, 2020, from https://bisnis.tempo.co/read/1294697/ada-kasus-rekayasa-laporan-keuangan-jiwasraya-iapi-sarankan-ini. The effect of audit rotation, audit fee and auditor competence on audit motivation and quality: Empirical evidence in Vietnam. Earnings Quality: Board Diversity Association, Executive Compensation, Debt Agreement and Investment Opportunity Suite.
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