TAKING CARE OF EARNINGS MANAGEMENT: DETECTION USING INTERNAL CONTROL REVIEW AND FINANCIAL RATIO ANALYSIS

Abstract

This study aimed to analyse the role of internal control and financial ratio analysis on
preventing and detecting earnings management in the financial statement of companies listed
on the Indonesia Stock Exchange. This study uses a quantitative research approach with a panel
data regression model. The calculation of earnings management was conducted based on the
model developed by Kothari et al. (2005). Using 628 sample companies for the period of 2015-
2016, the results show that effective internal control could reduce the tendency of earnings
management and that financial ratios could significantly provide indication of irregularities in
financial statements.