Moderating effect of internal control system to determinants influencing the financial statement disclosure

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This study examines whether the internal control system moderates the relationship among budget expenditure, government size, legislative size, and audit findings on financial statement disclosure in Indonesia. This is a quantitative study that uses the purposive sampling technique to collect data from 240 local governments in Indonesia. Data were analyzed using Structural Equation Modelling (SEM) with Smart PLS. The results show that government size, legislative size, and audit findings had a positive and significant effect on financial statement disclosure, whereas budget expenditure does not. In addition, the findings revealed that the internal control system moderates the relationship between government size and legislative size and financial statement disclosure, but not by audit findings. The study contributed to extending the institutional and agency theory that explains these factors toward disclosure in the local government in Indonesia. The findings suggest that Indonesia’s local governments consider potential factors regarding increasing pressure to carry out disclosure of financial statements, as well as increasing the proper disclosure required by applicable Indonesian regulations.

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    • Table 1. Summary of the final sample
    • Table 2. Summary of descriptive statistic
    • Table 3. PLS path algorithm and bootstrapping
    • Conceptualization
      Khoirul Aswar, Jumansyah Jumansyah
    • Data curation
      Khoirul Aswar, Sri Mulyani, Mahendro Sumardjo
    • Formal Analysis
      Khoirul Aswar, Jumansyah Jumansyah
    • Resources
      Khoirul Aswar, Sri Mulyani, Mahendro Sumardjo
    • Software
      Khoirul Aswar, Jumansyah Jumansyah
    • Supervision
      Khoirul Aswar
    • Validation
      Khoirul Aswar, Jumansyah Jumansyah, Sri Mulyani
    • Writing – original draft
      Khoirul Aswar
    • Methodology
      Khoirul Aswar, Jumansyah Jumansyah, Sri Mulyani
    • Visualization
      Jumansyah Jumansyah, Mahendro Sumardjo
    • Writing – review & editing
      Jumansyah Jumansyah, Sri Mulyani
    • Investigation
      Sri Mulyani, Mahendro Sumardjo