The Effect of Litigation Risk and Audit Quality on Earning Management: Evidence in Indonesia

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Abstract: In agency theory, entities that separate management and ownership functions will become vulnerable to agency conflicts. Agency conflicts that arise cause information provided by managers to be different or can be manipulated. One common practice carried out by managers is earnings management, where earnings management is a choice of accounting policies carried out by managers for various specific purposes. This research aims to examine and analyze the effect of litigation risk on earnings management and whether audit quality moderates the relationship litigation risk on earnings management. Warp PLS version 5.0 is used as a data processing tool. The object of this research is food and beverage companies that are listed on the Indonesia Stock Exchange period 2013-2017. The test results prove that litigation risk affects earnings management and audit quality strengthens the influence of litigation risk on earnings management.

WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 16, 2019, Art. #37

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St. Dwiarso Utomo, Zaky Machmuddah, Imang Dapit Pamungkas, "The Effect of Litigation Risk and Audit Quality on Earning Management: Evidence in Indonesia," WSEAS Transactions on Business and Economics, vol. 16, pp. 328-336, 2019, DOI:
St. Dwiarso Utomo, Zaky Machmuddah, Imang Dapit Pamungkas. The Effect of Litigation Risk and Audit Quality on Earning Management: Evidence in Indonesia. WSEAS Transactions on Business and Economics. 2019;16:328-336.
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