THE EFFECT OF INTERNATIONAL FINANCIAL REPORTING ` STANDARDS (IFRS) CONVERGENCE AND THE IMPLEMENTATION OF CORPORATE GOVERNANCE ON INTEGRITY OF FINANCIAL STATEMENTS Name : Linda Fatmawati Alfi NPM : 28211700 Major : Accounting Advisor : Dr. Budi Prijanto
INTRODUCTION Background 1. The financial report is a source of information that shall to published as a means of accountability from management to shareholders. 2. Financial statements with international standards necessary to facilitate the investors in the country and abroad to understand the financial statements are issued. 3. The diversity of financial reporting systems are different in every country, so that the necessary financial reporting as standards applicable to all countries, such as the International Financial Reporting Standards (IFRS). 4. The financial statements are presented should have high integrity and show a true and honest information. 5. Implementation of corporate governance is one of the ways that are expected to be able to improve the integrity of financial statements.
Problems Formulation 1. Does the variable of convergence of International Financial Reporting Standards (IFRS), managerial ownership, institutional ownership, board of commissioner, the audit committee, the proportion of independent commissioner affect the integrity of the financial statements either simultaneously and partially? 2. How big is the contribution of variables influence the convergence of International Financial Reporting Standards (IFRS), managerial ownership, institutional ownership, board of commissioner, the audit committee, the proportion of independent commissioner on the integrity of the financial statements?
Research Objective 1. To find out and analyze the influence of variables convergence of International Financial Reporting Standards (IFRS), managerial ownership, institutional ownership, board of commissioner, the audit committee, the proportion of independent commissioner on the integrity of the financial statements. 2. To determine the contribution of the effect of IFRS convergence, managerial ownership, institutional ownership, board of commissioner, the audit committee, the proportion of independent commissioner on the integrity of the financial statements.
Research Framework Hypothesis IFRS Convergence H1: The level of IFRS H 1 convergence influence on Managerial I H 2 ownership the integrity of the financial m o Integrity of p f G statements H 3 Institusional Financial l o ownership Statements e C v H2: Managerial ownership H 4 m o e Board of e r r influence on the integrity H 5 Commissioners n p n of the financial statements t o a H 6 a r n Audit Committee t a c H3: Institutional ownership i t e H5: The audit committee influence on the integrity Proportion of o e n Independent influence on the integrity of the financial statements. Commissioners of financial statements H4: The size of the board of H6: The proportion of commissioners influence independent on the integrity of financial commissioners influence statements on the integrity of financial statements
Research Methodology Population and Sample The population in this research is all manufacturing companies have been listed in Indonesia Stock Exchange (IDX) during the years 2010 to 2013. The sample used in this research is 15 companies in the manufacturing sector that has been registered on January 1, 2010 until December 31, 2013. Method of Data Collection The data used is secondary data. Secondary data in this research is obtained through books, journals and previous research that support this research. Based on the study of the documentation, the data used were obtained through the official website of the Indonesia Stock Exchange (IDX), www.idx.co.id.
Variable Research Independent Variable Dependent Variable Level of IFRS Convergence IFRS Convergence Managerial Integrity of Ownership Financial Statements Institusional Ownership ∑ board of commissioners in Board of the company Commissioners ∑ audit committee in the Audit Committee company Proportion of Independent Commissioner
Classical Assumption Test 1. Normality Test: The result show that the significant value > 0,05. So, it can be concluded the variables have a normal distribution. 2. Multicollinearity Test: The results show that all the independent variable has a value of tolerance > 0,1 and VIF <10. So, it can be concluded that there is no multicolinearity. Autocorrelation Test : The result show from the run 3. test, that the significant value > 0,05. So, it can be concluded that there is no autocorrelation. 4. Heteroscedasticity Test: The results show that the data point spread above and below 0 on Y axis with unclear pattern. So, it can be concluded that there is no heterocedasticity
Multiple Regression Analysis Coefficients a Standardized Model t Sig. Unstandardized Coefficients Coefficients B Std. Error Beta 1 (Constant) -1.125 .943 -1.193 .238 IFRS Convergence -.001 .004 -.031 -.257 .798 Managerial Owneship .046 .015 .401 3.100 .003 Institusional Ownership .014 .006 .317 2.216 .031 Board of Commissioners .128 .048 .345 2.654 .010 Audit Committee .119 .258 .060 .464 .645 Proportion of Independent Commissioners -.007 .006 -.158 -1.144 .258 a. Dependent Variable: Integrity of Financial Statements INTGR = -1,125 - 0,001 CIFRS + 0,046 MANAG + 0,014 INST + 0,128 COMSZ + 0,119 COMAU - 0,007 COMIND + e
Hypothesis Testing • F Test ANOVA b Sum of Mean Squares df Square F Sig. Model 9.310 6 1.552 3.110 .011 a 1 Regression 26.446 53 .499 Residual 35.757 59 Total a. Predictors: (Constant), Proportion of Independent Commissioners, Audit Committee, IFRS Convergence, Managerial Owneship, Board of Commissioners, Institusional Ownership b. Dependent Variable: Integrity of Financial Statements Sig value is 0,011 < 0,05, it means simultaneously that the convergence of IFRS, managerial ownership, institutional ownership, board of commissioner, audit committee, and the proportion of independent commissioners have an influence on the integrity of financial statements.
Hypothesis Testing • T Test Coefficients a IFRS Convergence = Sig > 0,05. Standar Unstandardized dized H1 was rejected Coefficients Coefficie Model t Sig. Managerial Ownership = Sig < 0,05. nts Std. H2 was accepted B Beta Error Institutional Ownership = sig < 0,05. (Constant) 1 -1.125 .943 -1.193 .238 H3 was accepted Board of Commissioner = sig < 0,05. IFRS Convergence -.001 .004 -.031 -.257 .798 Managerial H4 was accepted .046 .015 .401 3.100 .003 Owneship Audit Committee = sig > 0,05. Institusional .014 .006 .317 2.216 .031 H5 was rejected Ownership Board of Prop Independent Commissioner .128 .048 .345 2.654 .010 Commissioners = sig > 0,05. Audit Committee .119 .258 .060 .464 .645 Proportion of H6 was rejected Independent -.007 .006 -.158 -1.144 .258 Commissioners a. Dependent Variable: Integrity of Financial Statements
Hypothesis Testing Determination Coefficient Model Summary b Adjusted R Std. Error of Model R R Square Square the Estimate 1 .510 a .260 .177 .70639 a. Predictors: (Constant), Proportion of Independent Commissioners, Audit Committee, IFRS Convergence, Managerial Owneship, Board of Commissioners, Institusional Ownership b. Dependent Variable: Integrity of Financial Statements The value of Adjusted R square is 0.177 which indicates that the contribution influence independent variable, namely, the IFRS Convergence, managerial ownership, institutional ownership, the size of board of commissioners, audit committee, and the proportion of commissioners independent) in this research was 17.7%, while the remaining 82.3% is explained by other factors outside the model of this research.
Discussion 1. H1 was rejected because IFRS is a standard which tends to embrace the principle-based to allow for subjective interpretation of the company in implementing these standards. Then difficult to predicted. 2. H2 was accepted because Managers of the company more know of internal information and prospects of the company in the future than the owner. 3. H3 was accepted because Institusional ownership in the company can improve its monitoring of the behavior of managers in anticipation of a possible manipulation so as to improve the integrity of the financial statements. 4. H4 was accepted because Board of commissioner larger will cause the duty of every member of the board of commissioners to be more specific because there are committees that are more specialized in overseeing the company. 5. H5 was rejected because the number of audit committee of the company does not change its duties and functions to monitor the financial reporting so that any number of the audit committee, the integrity of the company's financial statements are the same. 6. H6 was rejected because the strong control of the company's founder and majority ownership makes board of commissioners become not independent and monitoring functions that should be the responsibility of being ineffective, so that performance of independent commissioner can not be improved even decreased .
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