The Relationship between Earnings Management, Financial Transparency, and Auditor Independence on Investor Trust
DOI:
https://doi.org/10.58812/wsaf.v3i03.2476Keywords:
Earnings Management, Financial Transparency, Auditor Independence, Investor TrustAbstract
This study investigates the relationship between earnings management, financial transparency, and auditor independence on investor trust in Indonesia. Using a quantitative research design, data were collected from 150 active investors through a questionnaire measured on a five-point Likert scale. The data were analyzed using SPSS version 25, employing descriptive statistics, validity and reliability testing, correlation analysis, and multiple regression. The results show that earnings management has a negative and significant effect on investor trust, indicating that manipulative reporting practices reduce investors’ confidence in financial information. In contrast, financial transparency and auditor independence both have positive and significant effects on investor trust, highlighting the importance of clear disclosures and professional audit integrity in strengthening investor confidence. Among the variables, financial transparency demonstrates the strongest influence, emphasizing its critical role in reducing information asymmetry and enhancing credibility. The study concludes that strengthening governance practices, improving reporting transparency, and ensuring auditor independence are essential strategies to enhance investor trust in Indonesia’s capital market.
References
[1] M. Molociniuc, A. Melega, M. Grosu, and ..., “Evolution of scientific research on audit quality reporting in the global economic context,” Entrep. …, 2022.
[2] A. H. Ismail, N. M. Merejok, M. R. M. Dangi, and ..., “Does audit quality matters in Malaysian public sector auditing?,” Journal of …. myjms.mohe.gov.my, 2020.
[3] K. J. Edström and D. Frisk, Audit rotation, does it matter?: A study on audit rotations relationship to audit quality and its contingencies. diva-portal.org, 2020.
[4] K. Ardillah and R. Chandra, “Auditor Independence, Auditor Ethics, Auditor Experience, and Due Professional Care on Audit Quality,” Account. Prof. J., vol. 4, no. 1, 2022.
[5] Z. Meini, A. Karina, K. Digdowiseiso, and ..., “Do Work Experience, Independence, Auditor Competency, And Time Budget Pressure Matter On Audit Quality?,” … Res. Critics …, 2022.
[6] T. P. Nugrahanti, E. Sudarmanto, M. Andani, and L. Judijanto, “The Effect of Audit Quality, Auditor Independence, and Financial Reporting Transparency on Internal Control Effectiveness: A Case Study of a Public Company in Indonesia,” West Sci. Account. Financ., vol. 1, no. 03, pp. 108–118, 2023.
[7] F. Addaraini, “Analysis of the effect of independence, professionalism, and competence on the quality of internal audit results with auditor ethics as moderating variable,” Int. J. Public Budgeting, Account. Financ., vol. 3, no. 1, pp. 62–73, 2020.
[8] N. K. E. Putri, “Audit firm selection and voluntary audit firm rotation: Which factors matter?,” Bus. Innov. Dev. Emerg. …, 2019, doi: 10.1201/9780429433382-1.
[9] S. Z. A. Shah and F. Wan, “Financial integration and earnings management: evidence from emerging markets,” J. Appl. Account. Res., 2023.
[10] K. Santos, R. Guerra, V. Marques, and ..., “Do critical audit matters matter? An analysis of their association with earnings management,” An Anal. Their …, 2020.
[11] R. McNamara, S. Kelly, and ..., “An event and earnings management study of a Key Audit Matters disclosure,” … 41st Annu. Congr., 2018.
[12] M. L. Nelwan, C. Simatupang, and B. I. Tansuria, “Value Relevance of Accounting Information in the Presence of Earnings Management,” J. Reviu Akunt. dan Keuang., vol. 10, no. 2, pp. 321–334, 2020.
[13] S. Rexhepi, S. Maloku, and I. Lushi, “The Role of the Internal Control Increasing Performance in the Public Institutions,” SSRN Electron. J., no. 1, pp. 1–8, 2023, doi: 10.2139/ssrn.4322872.
[14] S. Vyas, “Corporate Governance Practices in India: Problems & Importance,” Int. J. Multidiscip. Res., vol. 5, no. 3, pp. 1–9, 2023, doi: 10.36948/ijfmr.2023.v05i03.2801.
[15] P. F. Zhang and G. Shailer, “Changes in audit effort and changes in auditors’ disclosures of risks of material misstatement,” Br. Account. Rev., 2021.
[16] J. Hurt, W. Morton-Huddleston, and ..., “Federal CFOs at 30 Toward Data-Driven Decision Support,” … Manag., 2020.
[17] Z.-M. Zadorozhnyi, I. Ometsinska, and V. Muravskyi, “Determinants of firm’s innovation: increasing the transparency of financial statements,” Mark. i menedžment innovacij, no. 2, pp. 74–86, 2021.
[18] O. Eldar, “Designing business forms to pursue social goals,” Va. Law Rev., 2020.
[19] R. Juwita*, D. M. Ramadhani, and A. W. I. Maris, “The Determinants of Cryptocurrency Returns,” J. Ilmu Keuang. dan Perbank., vol. 12, no. 2, pp. 235–246, 2023, doi: 10.34010/jika.v12i2.9461.
[20] I. G. A. D. Perayunda and L. P. Mahyuni, “Faktor-faktor yang mempengaruhi keputusan investasi cryptocurrency pada kaum milenial,” EKUITAS (Jurnal Ekon. Dan Keuangan), vol. 6, no. 3, pp. 351–372, 2022.
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Indra Halim, Teguh Prakoso, Ahmad Zaki Mubarok, Ferlinda Ainur Rachmani, Eko Sudarmanto
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Facebook 
Instagram 
Twitter 
Youtube 
westscience.journals@gmail.com