IMPACT OF PSAK 71 IMPLEMENTATION AND AUDIT COMMITTEE EFFECTIVENESS ON EARNINGS MANAGEMENT IN THE BANKING SECTOR

Abstract

This study examines the influence of PSAK 71 implementation and audit committee supervision on restricting managerial discretion in loan loss provisions among 42 selected banks listed on the Indonesian Stock Exchange from 2017 to 2022. This research uses the Kanagaretnam et al., (2010) research model in measuring managerial discretion and the (Sitorus & Diyanty, 2019) scoring method in audit committee. Using this model, this research found that the implementation of PSAK 71 and audit committees had an impact on increasing bank managerial discretion. This explains that the implementation of PSAK 71 and the audit committee have not been able to limit managerial discretion, which may be due to the influence of unstable economic conditions due to the pandemic and countercyclical policy to anticipate the impact of the pandemic. Based on this, strategies for adjusting earnings management controls are very necessary in facing uncertain economic situations, such as the COVID-19 pandemic.