Determinants Quality of Local Government Financial Statements in Indonesia

This study aims to analyze determinants that affect the quality of local government financial statements in Indonesia. The determinants used in this study are the follow-up audit recommendations from Supreme Audit Institution (SAI) and political competition. The quality of local governments financial statements is measured based on their qualitative characteristics. This study uses a sample of 984 Indonesian local government financial statements from 2016-2017. In general, the average score of the quality of local government financial statements in Indonesia is 68.71%. The results of this study show that the SAI has a role in assisting local governments to improve the quality of their financial statements by giving appropriate recommendations that can be followed up by local governments. The political competition measured by percentage of opposition member in legislative show no significant association with the quality of their financial statements. However, additional testing shows that in the year of election, the political competition has significant positive association with the quality of financial statements.