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The effect of audit findings and audit recommendation follow-up on the financial report and public service quality in Indonesia

Andi Chairil Furqan (Department of Accounting, Faculty of Economics and Business, Universitas Tadulako, Palu, Indonesia)
Ratna Wardhani (Department of Accounting, Faculty of Economics and Business, Universitas Indonesia, Depok, Indonesia)
Dwi Martani (Department of Accounting, Faculty of Economics and Business, Universitas Indonesia, Depok, Indonesia)
Dyah Setyaningrum (Department of Accounting, Faculty of Economics and Business, Universitas Indonesia, Depok, Indonesia)

International Journal of Public Sector Management

ISSN: 0951-3558

Article publication date: 4 May 2020

Issue publication date: 22 June 2020

1087

Abstract

Purpose

This study aims to analyze the effect of audit findings and audit recommendations follow-up on the quality of financial reports and the quality of public services in the context of applying accrual accounting systems to local government in Indonesia. This study also examines whether the quality of the financial report affects the quality of public services.

Design/methodology/approach

This study employed cross-sectional regression using data from 1,437 observations from 491 districts/cities for 2014–2016. The data illustrates the conditions prior to the adoption of the accrual accounting system (2014), the initial year of application/transition period (2015) and the second year of the expected accrual accounting system (2016).

Findings

The results of the study indicate that, in general, the quality of financial reports affects the quality of public services. Regarding the implementation of audits in the public sector, it is also found that audit findings have a negative impact on the quality of financial report and the quality of public services, while audit recommendations follow-up plays a positive role in improving the quality of financial report and the quality of public services.

Research limitations/implications

The implication of the results of this study is closely related to the efforts to realize the ultimate goal of the recent government reforms. In order to increase the quality of public services in the era of higher report requirements through an accrual accounting system, the government should focus on the quality of financial reports, audit findings and the audit recommendations follow-up.

Originality/value

This study provides new insight on the link between the public sector auditing and the quality of accounting in accrual implementation context and the quality of public services.

Keywords

Acknowledgements

This research was funded by the PITMA Doctoral Grant awarded by the University of Indonesia in 2019

Citation

Furqan, A.C., Wardhani, R., Martani, D. and 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, Vol. 33 No. 5, pp. 535-559. https://doi.org/10.1108/IJPSM-06-2019-0173

Publisher

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Emerald Publishing Limited

Copyright © 2020, Emerald Publishing Limited

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