Factors affecting the disclosure level of local government financial statements: Role of audit opinion

Abstract

This study empirically examines the factors that influence the level of disclosure of local government financial statements, with audit opinion as a moderating variable. The ratio of financial independence, capital expenditure, intergovernmental revenue, and legislative size are independent variables in this study. The dependent variable is the degree of disclosure of local government financial statements (LKPD). The population used in this study is the financial statements of local governments in Indonesia that have been audited by BPK RI. The sample on this study consisted of 338 district/city governments on Java Island in 2018–2020 with purposive sampling. The test carried out is Multiple Linear Regression analysis using STATA version 16. Based on the results that have been analyzed, it can be concluded that the ratio of financial independence and intergovernmental revenue has a significant effect on the level of LKPD disclosure. Meanwhile, capital expenditure and legislative size have no significant effect on the level of LKPD disclosure. Audit opinion moderated the ratio of financial independence and legislative size on the level of disclosure of LKPD. Meanwhile, audit opinion does not moderate capital expenditure and intergovernmental revenue on the level of LKPD disclosure. This study provides information on the factors that influence the level of disclosure of LKPD in local governments, both districts/cities. A high level of LKPD disclosure indicates an accountability and transparency carried out by local governments.