Audit Quality and the Effectiveness of Accrual Reform: A Panel Study of Budget Composition Variance in Indonesia
DOI:
https://doi.org/10.61978/summa.v2i1.871Keywords:
Accrual Accounting, Budget Credibility, Composition Variance, Audit Quality, Public Financial Management, IndonesiaAbstract
This study evaluates the impact of Indonesia’s 2015 accrual based accounting reform on budget composition credibility in subnational governments, utilizing the PI 2 Composition Variance indicator from the PEFA framework. The objective is to determine whether the adoption of accrual accounting improved alignment between planned and actual expenditures across economic classifications. The research applies a panel data methodology covering 514 Indonesian provinces and districts from 2011 to 2021. Using fixed effects regression models, the study incorporates a reform dummy, audit quality (measured by unqualified audit opinions or WTP), and various fiscal controls including PAD per capita, TKDD, personnel spending share, and PDRB. Robustness checks include alternative specifications and treatment of outliers and administrative splits. The results indicate that accrual reform is associated with a statistically significant reduction in budget composition variance. Furthermore, the reform’s impact is stronger in jurisdictions that received WTP audit opinions, underscoring the moderating role of audit quality. The findings suggest that institutional maturity, particularly audit capacity, amplifies the benefits of financial reporting reforms. In conclusion, accrual reform can improve fiscal discipline through enhanced compositional execution, especially when reinforced by high quality auditing institutions. These insights support policy efforts to integrate technical reforms with institutional strengthening. Future research should examine how these improvements influence service delivery and broader governance outcomes.
References
Biswas, P. K., Griffin, P. A., & Lont, D. H. (2024). Long Term Trends in Non‐audit Fees and Audit Quality: New Evidence Based on Going Concern Opinions and Financial Restatements. Accounting and Finance. https://doi.org/10.1111/acfi.13376 DOI: https://doi.org/10.1111/acfi.13376
Dzigbede, K. D., Pathak, R., & Muzata, S. (2022). Budget Systems and Post-Pandemic Economic Resilience in Developing Countries. Journal of Public Budgeting Accounting & Financial Management, 35(3), 333–353. https://doi.org/10.1108/jpbafm-03-2021-0036 DOI: https://doi.org/10.1108/JPBAFM-03-2021-0036
El-Saman, A. A. M. A. (2022). Modern Financial Tools’ Impact on Public Financial Management: The Case of Egypt. Finance Theory and Practice, 26(6), 175–191. https://doi.org/10.26794/2587-5671-2022-26-6-175-191 DOI: https://doi.org/10.26794/2587-5671-2022-26-6-175-191
Ercan, H. (2021). Tahakkuk Esaslı Devlet Muhasebe Sisteminin Yeni Kamu Mali Yönetimi Açısından Değerlendirilmesi. Opus Uluslararası Toplum Araştırmaları Dergisi, 18(39), 1–1. https://doi.org/10.26466/opus.839165 DOI: https://doi.org/10.26466/opus.839165
Fadeikina, N. V., Fadeikin, G. A., & Morozova, O. V. (2023). About the Development of Tools Financial Management in the Public Administration Sector. Sibirskaya Finansovaya Shkola, 1, 5–17. https://doi.org/10.34020/1993-4386-2023-1-5-17 DOI: https://doi.org/10.34020/1993-4386-2023-1-5-17
Furqan, A. C., Wardhani, R., Martani, D., & Setyaningrum, D. (2020). The Effect of Audit Findings and Audit Recommendation Follow-Up on the Financial Report and Public Service Quality in Indonesia. International Journal of Public Sector Management, 33(5), 535–559. https://doi.org/10.1108/ijpsm-06-2019-0173 DOI: https://doi.org/10.1108/IJPSM-06-2019-0173
Hiola, Y., Pilomonu, M. R. S., & Asdar, A. (2024). Enhancing Food Security to Support the Sustainable Development Goals Through Public Sector Accounting Policy Reform in Indonesia. E3s Web of Conferences, 568, 04012. https://doi.org/10.1051/e3sconf/202456804012 DOI: https://doi.org/10.1051/e3sconf/202456804012
Indrawati, M., & Abdurrahman, A. (2024). The Influence of Auditor Type and Financial Performance on Auditor Opinions in Manufacturing Companies. Jisip (Jurnal Ilmu Sosial Dan Pendidikan), 8(1), 60. https://doi.org/10.58258/jisip.v8i1.5892 DOI: https://doi.org/10.58258/jisip.v8i1.5892
Jena, P. R. (2024). Public Financial Management in India. 275–298. https://doi.org/10.1093/9780198930464.003.0017 DOI: https://doi.org/10.1093/9780198930464.003.0017
Kaçmaz, Ö., Gökdemir, G. Ş., Özel, M., & Gökdemir, M. T. (2022). Clinical Assessment of Perfusion Index in Patients Presenting to the Emergency Department With Non-St-Segment Elevation Myocardial Infarction and Unstable Angina Pectoris. Harran Üniversitesi Tıp Fakültesi Dergisi, 19(1), 184–188. https://doi.org/10.35440/hutfd.1067974 DOI: https://doi.org/10.35440/hutfd.1067974
Kolijn, L., Bianca G. van den Bulk, IJzendoorn, M. H. v., Bakermans‐Kranenburg, M. J., & Huffmeijer, R. (2021). Does Maternal Inhibitory Control Mediate Effects of a Parenting Intervention on Maternal Sensitive Discipline? Evidence From a Randomized‐controlled Trial. Infant Mental Health Journal, 42(6), 749–766. https://doi.org/10.1002/imhj.21946 DOI: https://doi.org/10.1002/imhj.21946
Kurnia, R., & Arza, F. I. (2019). Analisis Perbandingan Kinerja Keuangan Pemerintah Daerah Yang Memperoleh Opini WTP Dengan Pemerintah Daerah Yang Memperoleh Opini Non WTP. Jurnal Eksplorasi Akuntansi, 1(2), 781–794. https://doi.org/10.24036/jea.v1i2.110 DOI: https://doi.org/10.24036/jea.v1i2.110
Lovemore, T. (2023). Public Financial Management Reforms in Botswana: A Review of Literature. Rjfa. https://doi.org/10.7176/rjfa/14-12-06 DOI: https://doi.org/10.7176/RJFA/14-12-06
Majer, C. G., & Makuac, L. J. A. (2023). Analysis of Strategic Public Financial Management Reforms on Effective Service Delivery. International Journal of Business and Social Science Research, 1–10. https://doi.org/10.47742/ijbssr.v4n3p1 DOI: https://doi.org/10.47742/ijbssr.v4n3p1
Malyniak, B., & PIDLISNY, I. (2018). Efficiency of Local Budget Expenditures: Control Mechanism in Scotland and Lessons for Ukraine. World of Finance, 3(56), 41–57. https://doi.org/10.35774/sf2018.03.041 DOI: https://doi.org/10.35774/sf2018.03.041
Metalia, M. (2022). Determinant Percieved Usefulness in Decision Making on Accrual Based Accounting in Indonesian Ministries. E-Jurnal Akuntansi, 32(9), 2850. https://doi.org/10.24843/eja.2022.v32.i09.p17 DOI: https://doi.org/10.24843/EJA.2022.v32.i09.p17
Mulyawati, A., & Munandar, A. (2022). Audits Quality in Mediating Profitability, Liquidity, Audit Lag, Prior Opinion on Accepting Going Concern Audits. Interdisciplinary Social Studies, 1(8). https://doi.org/10.55324/iss.v1i8.178 DOI: https://doi.org/10.55324/iss.v1i8.178
Musiega, A., Tsofa, B., Nyawira, L., Njuguna, R. G., Munywoki, J., Hanson, K., Mulwa, A., Molyneux, S., Maina, I., Normand, C., Jemutai, J., & Barasa, E. (2022). Examining the Influence of the Budget Formulation Structures and Processes on the Efficiency of County Health Systems in Kenya. https://doi.org/10.1101/2022.07.17.22277100 DOI: https://doi.org/10.1101/2022.07.17.22277100
Mutoharoh, M. (2018). Exploring the Changes Towards Accrual Accounting in Indonesian Local Governments. Jurnal Akuntansi Indonesia, 7(2), 12. https://doi.org/10.30659/jai.7.2.12-34 DOI: https://doi.org/10.30659/jai.7.2.12-34
Nguyen, N. A., Shen, H., Liu, Y., & Mackay, M. E. (2020). Kinetics and Mechanism of Poly(3-Hexylthiophene) Crystallization in Solution Under Shear Flow. Macromolecules, 53(14), 5795–5804. https://doi.org/10.1021/acs.macromol.0c00717 DOI: https://doi.org/10.1021/acs.macromol.0c00717
Pambudi, K., Fachrudin, F., Robin, R., & Muhammad, N. P. A. (2024). Opini Audit, Nilai Aset, Dan Kemandirian Daerah Sebagai Determinan Audit Delay: Studi Empiris Pada Pemerintah Provinsi Di Indonesia 2018-2021. Jaka (Jurnal Akuntansi Keuangan Dan Auditing), 5(1), 429–437. https://doi.org/10.56696/jaka.v5i1.11047 DOI: https://doi.org/10.56696/jaka.v5i1.11047
Probohudono, A. N., Widayat, W., & Arifah, S. (2020). Determining of the Compliance of Local Governments to Implement the Accounting System of the Government’s Accrual Base in Indonesia. Ilomata International Journal of Management, 1(4), 177–190. https://doi.org/10.52728/ijjm.v1i4.158 DOI: https://doi.org/10.52728/ijjm.v1i4.158
Republic of Armenia. (2019). Imf Country Report, 19(134). https://doi.org/10.5089/9781498315098.002 DOI: https://doi.org/10.5089/9781498315098.002
Samoshkina, O. (2021). Effectiveness of Budget Expenditures in Context Budgetary Regulation of Public Development. University Economic Bulletin, 48, 225–231. https://doi.org/10.31470/2306-546x-2021-48-225-231 DOI: https://doi.org/10.31470/2306-546X-2021-48-225-231
Sergeev, L. I., & Sergeev, D. L. (2023). Digitalization in the Processes of Classification of the Country’s Budget Expenditures. Finance Theory and Practice, 27(1), 195–207. https://doi.org/10.26794/2587-5671-2023-27-1-195-207 DOI: https://doi.org/10.26794/2587-5671-2023-27-1-195-207
Sylvia, Sukoharsono, E. G., Prihatiningtias, Y. W., & Roekhuddin. (2018). Public Interest and Accrual Accounting: Are They Aligned? Journal of Accounting & Organizational Change, 14(4), 366–380. https://doi.org/10.1108/jaoc-10-2017-0094 DOI: https://doi.org/10.1108/JAOC-10-2017-0094
Tuxhorn, K., D’Attoma, J., & Steinmo, S. (2021). Assessing the Stability of Fiscal Attitudes: Evidence From a Survey Experiment. Public Administration, 100(3), 633–652. https://doi.org/10.1111/padm.12736 DOI: https://doi.org/10.1111/padm.12736
Wahua, L., Anderson, P. D., Quayson, J. W., Chava, P., & Brobbey, S. (2024). Public Sector Audit Reforms and Financial Management. Journal of Advanced Research and Multidisciplinary Studies, 4(4), 71–888. https://doi.org/10.52589/jarms-vrcuirir DOI: https://doi.org/10.52589/JARMS-VRCUIRIR
Wishnia, J., & Goudge, J. (2020). Impact of Financial Management Centralisation in a Health System Under Austerity: A Qualitative Study From South Africa. BMJ Global Health, 5(10), e003524. https://doi.org/10.1136/bmjgh-2020-003524 DOI: https://doi.org/10.1136/bmjgh-2020-003524
