Regional Financial Performance, Audit Function, and Corruption Levels in Indonesia

Abstract

This study aims to examine the effect of financial performance on the level of corruption of the provincial government in Indonesia is moderated by audit findings. This research is motivated by Indonesia's efforts to fight corruption as an extraordinary crime. The development of corrupt practices has also increased since the implementation of the decentralization program. The phenomenon of increasing the level of regional corruption since the implementation of regional autonomy is the reason that observing the level of regional corruption is still necessary. This research was conducted in all 34 provincial governments in Indonesia, with an observation period of 2011-2015. The sample of this study was 156 sample data, obtained from financial data of 34 provinces for 5 years, and outlier data were 14 sample data. Analysis of the data in this study uses moderated regression analysis (MRA). The research concept was developed to predict the level of audit findings in moderating the effect of financial performance on the level of corruption in Indone-sia. Test results in this study indicate that the audit findings moderate the effect of the ratio of operating expenses and the ratio of capital expenditure to the level of corruption. While other results indicate that the audit findings do not moderate the effect of the level of independence of a region on the level of corruption.