Academy of Accounting and Financial Studies Journal (Print ISSN: 1096-3685; Online ISSN: 1528-2635)


Financial Statements Quality of Central Government Entities: A Test of Institutional and Agency Theories

Author(s): Dwi Ratmono, Sutrisno

Financial statements of central government entities play a pivotal role as an instrument of accountability to the public in the management of state budget. However, the numbers of previous studies which analyze determinants or efforts to improve the financial statements quality of central government entities are still limited. This research aims to analyze factors hypothesized will affect the quality of central government entities’ financial statements. The development of research hypotheses is mainly based on agency and institutional theories. Data were gathered through questionnaire survey method to 171 respondents of financial management officials from 41 Indonesia ministry/central government entities. Structural equation modeling partial least squares (SEM-PLS) was used as instrument to test the hypotheses. The results show that compliance with state financial management regulations, quality of human resources, reliability of internal control systems, and utilization of information technology provide positive effects on the financial statements quality of central government entities. This finding indicates the importance of those determinant factors to improve the accountability in managing the state finances.