| dc.description.abstract | Income smoothing is an act of accounting engineering by exploiting gaps in accounting standards. This
study aims to determine the motives for income-shifting management. Based on agency theory, this
study tested three hypotheses on two income-smoothing objects: operating income and net income.
This research is a quantitative study with data in Indonesian public manufacturing companies’ financial
statements dated December 31, 2009 - 2018 obtained from the Indonesian Capital Market Directory.
Hypothesis testing uses a binary logistic regression approach. The practice of income smoothing exists
in manufacturing companies in Indonesia. Management shift income with object engineering is gross
profit by 30.2% and net income by 21.7%. Hypothesis testing confirms that the commissionaire board
size is not a mechanism of supervision effectiveness. The independent commissioners’ size was able
to suppress income smoothing in manufacturing companies. Audit tenure has a negative effect on
income smoothing. The audit period is directly proportional to the auditor’s ability to limit income
smoothing. These results contribute to the formulation of policies, especially in improving the quality
of corporate governance. Even the public and investors can understand the indications of income
smoothing practices. New evidence suggests that income smoothing is less likely to be desired by
corporate governance mechanisms. The motive for income smoothing is considered opportunistic.
Audit tenure improves the quality of oversight of accounting engineering actions, contrary to the
previous opinion that tenure reduces auditor independence. | en_US |
