Article Sidebar

Download
PDF

Main Article Content

Abstract

This study explores the relationship between audit opinions and governance weaknesses in Indonesian local governments from 2020 to 2024. Although most local governments received Unqualified Audit Opinions (UAO), many still face problems in areas such as Government Accounting Standards (GASB) compliance, Internal Control Systems (ICS), legal violations, poor financial disclosures, and lack of follow-up on audit recommendations (FAR). Using five years of national audit summary data from BPK, this research applies trend analysis and regression to see how these issues affect audit opinion scores. The results show that better compliance with government accounting standards and clear financial disclosures lead to better audit ratings. Legal violations reduce audit opinion quality. ICS has a negligible effect, while the FAR follow-up has little short-term impact. This study suggests that audit opinions do not always reflect the actual condition of financial governance. It recommends strengthening performance audits and improving how audit opinions are evaluated.

Keywords

capital budgeting decision-making internal and external factors investment evaluation methods challenges

Article Details

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite
Siahay, A. . Z. D. ., & Salle, A. (2025). Public Audit and Governance Quality in Decentralized Systems: The Case of Indonesia. Amkop Management Accounting Review (AMAR), 5(2), 1027–1042. https://doi.org/10.37531/amar.v5i2.3245
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Abouelghit, M. G. M., & Gan, S. (2024). Empirical research on the effects of mandatory auditing for SMEs on their internal control quality and management’s perceptions: Evidence from Egypt. Cogent Business & Management, 11(1). https://doi.org/10.1080/23311975.2024.2412738
  2. Ahrens, T., & Ferry, L. (2025). Governmentality, counter‐conduct, and modes of governing: Accounting and the pursuit of municipal sustainable waste management. Contemporary Accounting Research, 42(2), 985–1012. https://doi.org/10.1111/1911-3846.13026
  3. Akinninyi Patrick Edet, A. D. C. U. A. O. (2025). Forensic Accounting and Financial Integrity in the Nigerian Public Sector. Journal of Accounting and Financial Management E, 11(3). https://doi.org/10.56201/jafm.vol.11.no3.2025.pg122.145
  4. Alharasis, E. E., Prokofieva, M., Clark, C., Haddad, H., & Alramahi, N. (2024). The development of international accounting and auditing standards for fair value accounting in the Arab Middle East, Jordan: a systematic review. Cogent Business & Management, 11(1). https://doi.org/10.1080/23311975.2024.2391564
  5. Alomair, A., & Al Naim, A. S. (2025). Audit committee leadership and audit quality: How audit committee chairman traits shape audit quality? Evidence from emerging markets. Cogent Business & Management, 12(1). https://doi.org/10.1080/23311975.2025.2502545
  6. Alzoubi, A. B. (2025). Maximizing internal control effectiveness: the synergy between forensic accounting and corporate governance. Journal of Financial Reporting and Accounting, 23(1), 404–416. https://doi.org/10.1108/JFRA-03-2023-0140
  7. Amalia, G. (2024). Enhancing Corporate Governance Through Rigorous and Insightful Auditing Processes. Advances in Managerial Auditing Research, 2(1), 1–14. https://doi.org/10.60079/amar.v2i1.233
  8. Aulia, R. (2023). Enhancing Decision Making through Professional Judgment and Comprehensive Information Analyses. Advances in Managerial Auditing Research, 1(3), 146–155. https://doi.org/10.60079/amar.v1i3.230
  9. Bacoup, P., & Michel, C. (2024). Organizational Stress Test: A New and Complementary Vision for the Auditing of Quality Management Systems (QMSs). Journal of Engineering, 2024(1). https://doi.org/10.1155/je/3879910
  10. Barbabela, L. (2024). Anti-Corruption Audits and Citizens’ Trust in Audit and Auditee Institutions. Latin American Politics and Society, 66(4), 78–91. https://doi.org/10.1017/lap.2024.10
  11. Beyer, B., Draeger, M., & Rapley, E. T. (2024). Audit process ineffectiveness: evidence from audit report errors. Journal of Accounting Literature. https://doi.org/10.1108/JAL-09-2023-0159
  12. Boufounou, P., Eriotis, N., Kounadeas, T., Argyropoulos, P., & Poulopoulos, J. (2024a). Enhancing Internal Control Mechanisms in Local Government Organizations: A Crucial Step towards Mitigating Corruption and Ensuring Economic Development. Economies, 12(4), 78. https://doi.org/10.3390/economies12040078
  13. Boufounou, P., Eriotis, N., Kounadeas, T., Argyropoulos, P., & Poulopoulos, J. (2024b). Enhancing Internal Control Mechanisms in Local Government Organizations: A Crucial Step towards Mitigating Corruption and Ensuring Economic Development. Economies, 12(4), 78. https://doi.org/10.3390/economies12040078
  14. Boufounou, P., Eriotis, N., Kounadeas, T., Argyropoulos, P., & Poulopoulos, J. (2024c). Enhancing Internal Control Mechanisms in Local Government Organizations: A Crucial Step towards Mitigating Corruption and Ensuring Economic Development. Economies, 12(4), 78. https://doi.org/10.3390/economies12040078
  15. Cappellieri, F., Lombardi, R., Pizzo, M., & Vinciguerra, R. (2025). Environmental reporting in public sector organizations: A review of literature for the future paths of research. Financial Accountability & Management, 41(1), 159–199. https://doi.org/10.1111/faam.12411
  16. Chamusca, P. (2025). Governance, participation, and development: local power’s perspective in Portugal. International Planning Studies, 30(3), 292–318. https://doi.org/10.1080/13563475.2025.2457656
  17. Chou, Y.-Y., Lin, Y.-C., & Lin, Y.-C. (2025). The impacts of aggressive accounting choices on auditor changes are significant. Review of Quantitative Finance and Accounting. https://doi.org/10.1007/s11156-025-01406-4
  18. Cordery, C., Arora, B., & Manochin, M. (2023). Public sector audit and the state’s responsibility to “leave no‐one behind”: The role of integrated democratic accountability. Financial Accountability & Management, 39(2), 304–326. https://doi.org/10.1111/faam.12354
  19. Denny, E. K., Phan, N., Romero, D., & Wibbels, E. (2024). Incentives, audits and procurement: Evidence from a district‐level field experiment in Ghana. Governance, 37(3), 729–750. https://doi.org/10.1111/gove.12798
  20. Dermarkar, S., Samsonova-Taddei, A., & Gendron, Y. (2025). Mythmaking in audit regulation: the Canadian initiative on ‘enhancing audit quality.’ Accounting and Business Research, 55(3), 302–329. https://doi.org/10.1080/00014788.2023.2278727
  21. Elmashtawy, A., Che Haat, M. H., Ismail, S., & Almaqtari, F. A. (2024). Audit committee effectiveness and audit quality: the moderating effect of joint audit. Arab Gulf Journal of Scientific Research, 42(3), 512–533. https://doi.org/10.1108/AGJSR-09-2022-0202
  22. Enakrire, R. T. (2025). Knowledge Management Practices Among Librarians: Tracing the Missing Link. Electronic Journal of Knowledge Management, 23(1), 1–14. https://doi.org/10.34190/ejkm.23.1.3140
  23. Findeisen, F., & Le Galès, P. (2025). Decentralization, Europeanization, State Restructuring, and the Politics of Instruments Accumulation: The Case of the French Housing Sector. Regulation & Governance. https://doi.org/10.1111/rego.70047
  24. Ghattas, P., Soobaroyen, T., Uddin, S., & Marnet, O. (2024). Auditing the auditors: a performative “spectacle” of public oversight. Accounting, Auditing & Accountability Journal, 37(3), 764–789. https://doi.org/10.1108/AAAJ-08-2022-5957
  25. Gomes, P., Salato, R., & Ferreira, C. (2025). Transition to accrual accounting in a developing country: the perception of accounting professionals. Journal of Accounting in Emerging Economies. https://doi.org/10.1108/JAEE-10-2024-0447
  26. Gupta, P. P., Sami, H., Zhang, J. H., & Zhou, H. (2025). Does the 2013 COSO internal control framework improve the information environment in the U.S. capital markets? Managerial Auditing Journal, 40(4), 357–383. https://doi.org/10.1108/MAJ-11-2023-4118
  27. Hanafi, M. A. A., Yatim, N. M., & Salim, A. S. A. (2024). Unveiling the transition: Factors influencing true and fair view reporting in the accrual-based accounting migration of Malaysian federal statutory bodies. Asian Economic and Financial Review, 14(5), 389–409. https://doi.org/10.55493/5002.v14i5.5071
  28. Hasiara, L. O., Juri, M., Hartoko, S., Hasriadi, L. M., & Yanti, W. (2024). East Kalimantan Province Regional Government’s Sustainability Strategy in Achieving Unqualified Opinion (UQO). Journal of Hunan University Natural Sciences, 51(11). https://doi.org/10.55463/issn.1674-2974.51.11.10
  29. Hazaea, S. A., Al-Matari, E. M., Omer, A. M., Farhan, N. H. S., & Zhu, J. (2024). The impact of internal audit system on performance: evidence from emerging markets. Humanities and Social Sciences Communications, 11(1), 1307. https://doi.org/10.1057/s41599-024-03835-3
  30. Henriques, J., Caldeira, F., Cruz, T., & Simões, P. (2024). A Survey on Forensics and Compliance Auditing for Critical Infrastructure Protection. IEEE Access, 12, 2409–2444. https://doi.org/10.1109/ACCESS.2023.3348552
  31. Ikhtiari, K. (2023). Best Practices and Innovations in Modern Financial Statement Audits. Advances in Managerial Auditing Research, 1(3), 135–145. https://doi.org/10.60079/amar.v1i3.277
  32. Ilori, O. (2024). Enhancing IT Audit Effectiveness with Agile Methodologies: A Conceptual Exploration. https://doi.org/10.51594/estj/v5i6.1217
  33. Jaffe, J., Loffredo, J. R., Baltz, S., Flores, A., & Stewart, C. (2024). Trust in the Count: Improving Voter Confidence with Post-election Audits. Public Opinion Quarterly, 88(SI), 585–607. https://doi.org/10.1093/poq/nfae029
  34. Johri, A. (2024). Examining the Impact of International Financial Reporting Standards Adoption on Financial Reporting Quality of Multinational Companies. International Journal of Financial Studies, 12(4), 96. https://doi.org/10.3390/ijfs12040096
  35. Kartim, K. (2023). Examining Factors that Affect the Quality of Government Financial Statements. Advances in Managerial Auditing Research, 1(2), 95–102. https://doi.org/10.60079/amar.v1i2.108
  36. Kuhlmann, S., Franzke, J., Peters, N., & Dumas, B. P. (2024). Institutional designs and dynamics of crisis governance at the local level: European governments facing the polycrisis. Policy Design and Practice, 7(4), 409–429. https://doi.org/10.1080/25741292.2024.2344784
  37. Lee, T. A. (2025). A failure of accountancy professionalisation: corporate financial reporting and accounting knowledge. Accounting, Auditing & Accountability Journal, 38(1), 31–59. https://doi.org/10.1108/AAAJ-09-2022-6032
  38. Legodi, A. H., & Coetzee, P. (2025). Enhancing effective public sector governance: Effectiveness of audit committees in South African municipalities. AOSIS. https://doi.org/10.4102/aosis.2025.BK479
  39. Li, J. (2025). Governing High-Risk Technologies in a Fragmented World: Geopolitical Tensions, Regulatory Gaps, and Institutional Barriers to Global Cooperation. Fudan Journal of the Humanities and Social Sciences. https://doi.org/10.1007/s40647-025-00445-4
  40. Lomas, T. (2024). A global picture of unidentified anomalous phenomena: Towards a cross‐cultural understanding of a potentially universal issue. International Social Science Journal, 74(253), 851–879. https://doi.org/10.1111/issj.12484
  41. Maroun, W., & Duboisée de Ricquebourg, A. (2024). How auditors identify and report key audit matters - An organizational routines perspective. The British Accounting Review, 56(2), 101263. https://doi.org/10.1016/j.bar.2023.101263
  42. Mesa, D. (2023). Digital divide, e-government and trust in public service: The key role of education. Frontiers in Sociology, 8. https://doi.org/10.3389/fsoc.2023.1140416
  43. Monkam, N., & Mangwanya, M. G. (2024). Digital Tools for Boosting the Impact of Fiscal Decentralization in Africa’s Local Economies. F1000Research, 13, 279. https://doi.org/10.12688/f1000research.143922.1
  44. Mugo, M. G. (2023). The impact of health insurance enrollment on health outcomes in Kenya. Health Economics Review, 13(1), 42. https://doi.org/10.1186/s13561-023-00454-7
  45. Musiega, A., Tsofa, B., & Barasa, E. (2024). How does Public Financial Management (PFM) influence health system efficiency: A scoping review. Wellcome Open Research, 9, 566. https://doi.org/10.12688/wellcomeopenres.22533.1
  46. Nadirsyah, Indriani, M., & Mulyany, R. (2024). Enhancing fraud prevention and internal control: the key role of internal audit in public sector governance. Cogent Business & Management, 11(1). https://doi.org/10.1080/23311975.2024.2382389
  47. Nguyen Phu, G., Hoang Thi, T., & Tran Nguyen Bich, H. (2025). The impact of cloud computing technology on cloud accounting adoption and financial management of businesses. Humanities and Social Sciences Communications, 12(1), 851. https://doi.org/10.1057/s41599-025-05190-3
  48. Nurhidayah, N., Sudarma, M., Djamhuri, A., & Atmini, S. (2024). Audit opinion research: overview and research agenda. Cogent Business & Management, 11(1). https://doi.org/10.1080/23311975.2023.2301134
  49. O’Regan, B., King, R., & Smith, D. (2022). Combining accountability forms: transparency and “intelligent” accountability in a public service organization. Accounting, Auditing & Accountability Journal, 35(5), 1287–1315. https://doi.org/10.1108/AAAJ-03-2020-4473
  50. Oladejo, M. T., Botes, V., Low, M., & Reeves, S. (2024). Blockchain technology disruptions: Exploring accounting and auditing academics and practitioners’ perception. Accounting & Finance. https://doi.org/10.1111/acfi.13383
  51. Olujobi, O. J., Irumekhai, O. S., & Aina-Pelemo, A. D. (2024). Sustainable Development and National Integration: A Catalyst for Enhancing Environmental Law Compliance in Nigeria. Environmental Policy and Law, 54(1), 27–41. https://doi.org/10.3233/EPL-230050
  52. Owusu-Afriyie, R., Awunyo-Vitor, D., Gyimah, P., & Appiah, K. O. (2024). Monitoring and audit quality: Does quality standards compliance matter? Cogent Business & Management, 11(1). https://doi.org/10.1080/23311975.2024.2416095
  53. Pasko, O., Zhang, L., Proskurina, N., Ryzhikova, N., & Mykhailova, Y. (2024). Does internal audit matter? Audit committee, its attributes, and corporate social responsibility reporting quality. Investment Management and Financial Innovations, 21(2), 70–88. https://doi.org/10.21511/imfi.21(2).2024.06
  54. Power, M. (2003). Evaluating the Audit Explosion. Law & Policy, 25(3), 185–202. https://doi.org/10.1111/j.1467-9930.2003.00147.x
  55. Qaiser, A., & Hassan, S. (2024). The role of rule-following and accountability leadership and management support in internal control effectiveness moderated by organizational culture. Journal of Organizational Effectiveness: People and Performance. https://doi.org/10.1108/JOEPP-03-2024-0111
  56. Rakhmadani, N. P., & Suzana, S. (2025). Analysis of the Impact of Audit Fee Reduction on Audit Quality and Stakeholder Trust. Advances in Managerial Auditing Research, 3(1), 44–56. https://doi.org/10.60079/amar.v3i1.452
  57. Ramos, S., Perez-Lopez, J. A., Abreu, R., & Nunes, S. (2024). Impact of fraud in Europe: Causes and effects. Heliyon, 10(22), e40049. https://doi.org/10.1016/j.heliyon.2024.e40049
  58. Roberto, F., Grossi, G., Guthrie, J., & Mattei, G. (2025). The development of New Public Financial Management scholarship: from global warning to emerging warnings. Journal of Public Budgeting, Accounting & Financial Management, 37(6), 49–76. https://doi.org/10.1108/JPBAFM-01-2025-0021
  59. Rumkabu, F. M., Mutmainnah, M., & Pasolo, M. R. . (2024). Slack Resources, Audit Committee, Board Feminism on the Quality of Corporate Social Responsibility Disclosure of Mining Industry Companies. Advances in Managerial Auditing Research, 2(3), 157–170. https://doi.org/10.60079/amar.v2i3.156
  60. Sari, R. (2025). Challenges in Sustainability Auditing: Measuring Environmental and Social Impacts in Modern Enterprises. Advances in Managerial Auditing Research, 3(1), 1–14. https://doi.org/10.60079/amar.v3i1.416
  61. Savastano, M. C., Rizzo, C., Fossataro, C., Bacherini, D., Giansanti, F., Savastano, A., Arcuri, G., Rizzo, S., & Faraldi, F. (2025). Artificial intelligence in ophthalmology: Progress, challenges, and ethical implications. Progress in Retinal and Eye Research, 107, 101374. https://doi.org/10.1016/j.preteyeres.2025.101374
  62. Sawaya, C., Jabbour Al Maalouf, N., Hanoun, R., & Rakwi, M. (2025). Impact of auditor independence, expertise, and industry experience on financial reporting quality. Asia Pacific Management Review, 30(1), 100357. https://doi.org/10.1016/j.apmrv.2025.100357
  63. Schweitzer, R., & Streiter, A. (2025). The Social Worker as Border Guard: How and Why British Welfare Workers Are Disposed to Control Immigration. International Migration Review. https://doi.org/10.1177/01979183251314830
  64. Seow, R. Y. C. (2025). The Dynamics of Performance Feedback and ESG Disclosure: A Behavioral Theory of the Firm Perspective. Corporate Social Responsibility and Environmental Management, 32(2), 2598–2615. https://doi.org/10.1002/csr.3083
  65. Shahib, H. M., & Abbas, Y. (2025). SDGs and changes in Indonesia local government’s accounting indicators: lessons from a learning organization perspective. Public Money & Management, 1–11. https://doi.org/10.1080/09540962.2025.2461569
  66. Shen, L., Zhou, K. Z., & Luo, D. (2025). City Digitalization and Corporate Financial Fraud: An Information Asymmetry Perspective. Journal of Management Studies. https://doi.org/10.1111/joms.13197
  67. Shuwaili, A. M. J., Hesarzadeh, R., & Bagherpour Velashani, M. A. (2024). Designing an internal audit effectiveness model for public sector: qualitative and quantitative evidence from a developing country. Journal of Facilities Management, 22(5), 792–810. https://doi.org/10.1108/JFM-07-2022-0077
  68. Simões, M. de F., & Carvalho, C. (2024). Determinants of Qualified Audit Opinion: Empirical Study of Portuguese Private Sector Hospitals. Journal of Risk and Financial Management, 17(12), 571. https://doi.org/10.3390/jrfm17120571
  69. Stantcheva, S. (2024). Why Do We Dislike Inflation? Brookings Papers on Economic Activity, 2004(1), 1–46. https://doi.org/10.1353/eca.2024.a943913
  70. Steccolini, I., & Barbera, C. (2025). Translating, resisting, or escalating government programs? Accounting at the intersection of centrally imposed programs and local responses. Contemporary Accounting Research. https://doi.org/10.1111/1911-3846.13033
  71. Sun, H., & Jiang, L. (2025). Untangling the relationship between government procurement and internal control quality: an empirical study in China. Spanish Journal of Finance and Accounting / Revista Española de Financiación y Contabilidad, 54(2), 188–214. https://doi.org/10.1080/02102412.2025.2450192
  72. Sutisna, E. (2025). Evaluating Security Risks and the Impact of Analytic Technology on the Audit Process. Advances in Managerial Auditing Research, 3(1), 30–43. https://doi.org/10.60079/amar.v3i1.419
  73. Tabim, V. M., Ayala, N. F., Marodin, G. A., Benitez, G. B., & Frank, A. G. (2024). Implementing Manufacturing Execution Systems (MES) for Industry 4.0: Overcoming buyer-provider information asymmetries through knowledge sharing dynamics. Computers & Industrial Engineering, 196, 110483. https://doi.org/10.1016/j.cie.2024.110483
  74. Tanveer, U., Ishaq, S., & Hoang, T. G. (2024). Enhancing carbon trading mechanisms through innovative collaboration: Case studies from developing nations. Journal of Cleaner Production, 482, 144122. https://doi.org/10.1016/j.jclepro.2024.144122
  75. Wibowo, A. S., Istianah, I., Sari, N. P., Rakhman, F., & Septiari, D. (2025). Does organizational integrity matter in enhancing financial reporting quality? Empirical evidence from local governments in Indonesia. Journal of Accounting & Organizational Change. https://doi.org/10.1108/JAOC-09-2024-0321
  76. Wu, T.-H., & Huang, S. Y. (2025). Assessing the Maturity of Audit Data Analytics and Operational Performance. Journal of Information Systems, 1–26. https://doi.org/10.2308/ISYS-2024-007
  77. Xu, H. (2024). Regulatory fragmentation and internal control weaknesses. Journal of Accounting and Public Policy, 44, 107191. https://doi.org/10.1016/j.jaccpubpol.2024.107191
  78. Z. D. Siahay, A., C. Seralurin, Y., Ervina, M. T., & Pattiasina, V. (2023). Professional Competence and Skepticism on Audit Quality. Advances in Managerial Auditing Research, 1(2), 58–66. https://doi.org/10.60079/amar.v1i2.114
  79. Zhou, C., Li, M., & Zhao, Y. (2025). Driving effect of government environmental protection expenditure on green technology from the perspective of fiscal transparency. Humanities and Social Sciences Communications, 12(1), 498. https://doi.org/10.1057/s41599-025-04791-2
  80. Zhou, Y., Chen, L., Zhang, Y., & Li, W. (2024). “Environmental disclosure greenwashing” and corporate value: The premium effect and premium devalue of environmental information. Corporate Social Responsibility and Environmental Management, 31(3), 2424–2438. https://doi.org/10.1002/csr.2698

Similar Articles

<< < 1 2 3 4 5 6 7 8 9 10 > >> 

You may also start an advanced similarity search for this article.