The Effect of International Financial Reporting Standars on the Real Earnings Management and Internal Control Structure as a Moderating Variable

Year 2016, Volume: 6 Issue: 4, 1807 - 1814, 01.09.2016

Theresia Dwi Hastuti İmam Ghozali Etna Nur Afri Yuyetta

Abstract

Earnings management has become a widely known phenomenon towards managing reported earning in order to fulfill targets. Scott (1997) defines
earnings management as a management choice upon accounting policy, or a real activity that affects earnings as such that multiple objectives of
the specific earnings reporting can be obtained. The perspective of financial statement contends that a manager uses earnings management to match
financial analyst’s forecast with the objective of avoiding perception and negative reaction, which in turn brings impact on stock price. This study
aimed to examine the effect of International Financial Reporting Standards (IFRS)-based accounting standard on the real earnings management (REM)
moderated by internal control structure. Samples for the study were manufacture companies listed in the Indonesian Stock Exchange 2010-2014. The
study found that adoption of the IFRS-based accounting standard had a positive effect on the REM and good corporate governance proxied by internal
control structure weaken the positive effect of the IFRS-based accounting standard adoption on the REM.

Keywords

Real Earnings Management, International Financial Reporting Standards, Good Corporate Governance, Internal Control Structure