The Effect Of Audit Quality And Earnings Management On Financial Performance Of Food And Beverage Manufacturing Companies Listed On The Indonesia Stock Exchange (2020-2024)

Abstract

This study aims to empirically analyze the effect of audit quality and earnings management, both partially and simultaneously, on financial performance among food and beverage manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2024 period. Utilizing an associative quantitative research design, secondary data were gathered from 25 audited financial statements selected through purposive sampling, generating 125 firm year observations. Audit quality was measured using a dummy variable representing Big Four versus Non-Big Four public accounting firms, earnings management was calculated via Discretionary Accruals using the Modified Jones Model, and financial performance was proxied by Return on Assets (ROA). Multiple linear regression analysis was executed after confirming all classical assumption tests (Monte Carlo normality, multicollinearity, heteroscedasticity, and Cochrane-Orcutt autocorrelation correction). The empirical results reveal that: (1) Audit quality has a positive and statistically significant effect on financial performance (β = 5.228, p = 0.033); (2) Earnings management exhibits a positive and statistically significant effect on reported financial performance (β = 50.292, p = 0.000); and (3) Audit quality and earnings management simultaneously exert a significant impact on financial performance (F = 11.991, p = 0.000) with an Adjusted R Square of 15.1%. These findings provide valuable insights for investors, auditors, and corporate management regarding financial reporting integrity and corporate governance.