Audit findings, financial performance, and audit opinion of local government: Evidence in Indonesia

This study aims to obtain empirical evidence on the influence of the compliance with accounting standards and legislation and financial performance on the quality of the local government audit opinion. This study analyzes audit opinions from 2014 to 2016. Secondary data from the audit reports conducted by the Audit Board of the Republic of Indonesia (BPK-RI) is used. Data are collected using documentation techniques. The results show that only the audit findings related to internal control systems (ICS) have a significant effect on audit opinion, but audit findings related to compliance with legislation have no effect. On the other hand, the variable of financial performance, which reflects both efficiency and effectiveness, has a significant impact on the audit opinion. The results provide empirical evidence that to improve the audit opinion of local government, the local government must improve the audit findings conducted by the BPK-RI, particularly audit findings related to local government ICS. Besides, the financial performance of each province must be effective and efficient, so that the role of BPK-RI in creating good governance in local governments can function well.