The Impact of Audit Committees and Risk Monitoring Committees on Financial Reporting Quality: The Moderating Role of Internal Control
Keywords:
Risk Monitoring Committee; Financial Reporting Quality; Corporate Governance; Accounting Conservatism; PLS-SEM
Abstract
The quality of financial reporting affects how accountable, open, and fact-based decisions are made. This study examines the impact of audit and risk monitoring committees on the quality of financial reporting, employing internal control systems as a moderating variable. The study focuses on financial sector companies that were listed on the Indonesia stock Exchange between 2020 and 2024. We use the quantitative method of partial least squares structural equation modelling (PLS-SEM) to look at panel data from annual reports. To judge governance processes, they look at independence, experience, and how often meetings are held. The results show that audit and risk monitoring committees have a big and good effect on the quality of financial reporting. Internal control mechanisms don’t weaken the link between audit committees and reporting quality. Instead, they strengthen the link between risk monitoring committees and financial reporting quality. The study shows that good governance and integrated control systems are very important for improving financial reporting as a whole.
References
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Setiawan, D., Phua, L. K., Chee, H. K., & Trinugroho, I. (2020). The effect of audit committee characteristics on earnings management: The case of Indonesia. Afro-Asian Journal of Finance and Accounting, 10(4).
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Prema S. (2021). A Decisive Role Played By Language in the Arena of Marketing and Advertisement: An Exploration of Ubiquitous Element, Asian Journal of Management, Entrepreneurship and Social Science, Vol. 1, Iss. 1, pp. 17-24.
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Jeswald W. Salacuse. (2003), The Global Negotiator, Palgrave MacMillan.
Musa. Faridah. (2011), Negotiation skills: Teachers’ Feedback as Input Strategy, Procedia Social and Behavioral Sciences, Vol. 59, pp. 221-226.
P.J. Fos. (1991), A Method of Teaching Negotiating Skill, J Health Adm Educ. Vol. 9, Iss. 3, pp. 289-305.
Reardon, Kelly Kathleen. (1994), Starting our Right: Negotiation Lessons for Domestic and Cross-Cultural Business Alliances, Business Horizons, Vol. 37, Iss. 1, pp. 71-79.
Salacuse, Jeswald. (1991), Making Deals in Strange Places: A Beginner's Guide to International Business Negotiations, Negotiation Theory, and Practice. Eds. J. William Breslin and Jeffrey Z. Rubin. Cambridge, MA: The Program on Negotiation at Harvard Law School, pp. 251-260.
Abu Hamour, A. M., Massadeh, D. D. M., & Bshayreh, M. M. (2021). The impact of the COSO control components on financial performance in Jordanian banks and the moderating effect of board independence. Journal of Sustainable Finance and Investment, 13(1), 161–175. https://doi.org/10.1080/20430795.2021.1886553
Ali, A. (2024). Audit committee characteristics and earnings management of insurance companies in Ethiopia. Cogent Business and Management, 11(1). https://doi.org/10.1080/23311975.2023.2301136
Andini, A., Anshari, R., & Pribadi, M. I. (2025). The effect of audit quality and audit committee independence on financial reporting quality in the healthcare sector. GEMILANG: Jurnal Manajemen dan Akuntansi, 5(3), 985–1007.
Arisandi, A., Islami, H. A., & Soeprajitno, R. R. W. N. (2022). Internal control disclosure and financial reporting quality: Evidence from the banking sector in Indonesia. E-Jurnal Akuntansi, 32(2), 3797. https://doi.org/10.24843/eja.2022.v32.i02.p15
Arpaini, S., & Ovami, D. C. (2024). Financial reporting quality: The role of internal control systems and human resource competence. COSTING: Journal of Economic, Business and Accounting, 7(1), 4450. https://doi.org/10.31539/costing.v7i3.7927
Azri, R., & Ruslim, H. (2023). The effect of internal control, internal audit, and good corporate governance on financial reporting quality. Co-Value Jurnal Ekonomi Koperasi dan Kewirausahaan, 14(7).
Basuki, A. T., & Prawoto, N. (2019). Analisis regresi dalam penelitian ekonomi dan bisnis. PT Rajagrafindo Persada.
Beasley, M., Blay, A., Lewellen, C., & McAllister, M. (2023). Tempering financial reporting risk through board risk management. Journal of Risk and Financial Management, 16(12). https://doi.org/10.3390/jrfm16120491
Bhuiyan, M. B. U., Salma, U., Roudaki, J., & Tavite, S. (2020). Financial reporting quality, audit fees and risk committees. Asian Review of Accounting, 28(3), 423–444. https://doi.org/10.1108/ARA-01-2019-0017
Elmashtawy, A., Che Haat, M. H., Ismail, S., & Almaqtari, F. A. (2023). Audit committee effectiveness and audit quality: The moderating effect of joint audit. Arab Gulf Journal of Scientific Research. https://doi.org/10.1108/AGJSR-09-2022-0202
Fadya, S., Ningsi, E. H., & Siregar, F. A. H. (2024). The effect of internal audit and internal control systems on financial reporting quality. EKOMA: Jurnal Ekonomi, Manajemen, Akuntansi, 4(1), 993–1007. https://doi.org/10.56799/ekoma.v4i1.5941
Fariha, R., Hossain, M. M., & Ghosh, R. (2022). Board characteristics, audit committee attributes and firm performance: Evidence from an emerging economy. Asian Journal of Accounting Research, 7(1), 84–96. https://doi.org/10.1108/AJAR-11-2020-0115
Galal, H. M., Soliman, M. M., & Bekheit, M. B. (2022). The relation between audit committee characteristics and earnings management. American Journal of Industrial and Business Management, 12(9), 1439–1467. https://doi.org/10.4236/ajibm.2022.129080
Ge, W., Li, Z., Liu, Q., & McVay, S. (2021). Internal control over financial reporting and resource extraction. Contemporary Accounting Research, 38(2), 1274–1309. https://doi.org/10.1111/1911-3846.12653
Handayani, T., & Budiantara, M. (2023). The effect of corporate governance mechanisms on financial reporting integrity. AKURASI: Jurnal Riset Akuntansi dan Keuangan, 5(3), 287–298. https://doi.org/10.36407/akurasi.v5i3.1126
Hasan, A., Aly, D., & Hussainey, K. (2022). Corporate governance and financial reporting quality: A comparative study.
Hoesada, J. (2020). Teori keagenan.
Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Human Relations, 72(10), 1671–1696. https://doi.org/10.1177/0018726718812602
Krishnan, J., Krishnan, J., & Liang, S. (2020). Internal control and financial reporting quality of small firms. Review of Accounting and Finance, 19(2), 221–246. https://doi.org/10.1108/RAF-05-2018-0107
Mardessi, S. (2022). Audit committee and financial reporting quality: The moderating effect of audit quality. Journal of Financial Crime, 29(1), 368–388. https://doi.org/10.1108/JFC-01-2021-0010
Mohammad, A. J., & Ahmed, D. M. (2020). The impact of audit committee and external auditor characteristics on financial reporting quality. Research Journal of Finance and Accounting.
Musallam, S. R. M. (2020). Effects of board characteristics, audit committee and risk management on corporate performance. International Journal of Islamic and Middle Eastern Finance and Management, 13(4), 691–706. https://doi.org/10.1108/IMEFM-12-2017-0347
Pfeffer, J., & Salancik, G. (1978). The external control of organizations: A resource dependence perspective. Harper & Row.
Safitri, A., Wijaya, K., & Ariyanti, R. (2021). The effect of internal control, corporate governance, and financial reporting quality. JAKA (Jurnal Akuntansi, Keuangan, dan Auditing), 2(1). https://doi.org/10.56696/jaka.v2i1.5150
Senan, N. A. M. (2024). The moderating role of corporate governance on internal audit and financial reporting quality. Journal of Risk and Financial Management, 17(3). https://doi.org/10.3390/jrfm17030124
Setiawan, D., Phua, L. K., Chee, H. K., & Trinugroho, I. (2020). The effect of audit committee characteristics on earnings management: The case of Indonesia. Afro-Asian Journal of Finance and Accounting, 10(4).
Sharma, M., & Kaur, R. (2021). Accounting conservatism and corporate governance: Evidence from India. Journal of Global Responsibility, 12(4), 435–451. https://doi.org/10.1108/JGR-07-2020-0072
Sugiyono. (2017). Metode penelitian kuantitatif.
Sugiyono. (2019). Metode penelitian pendidikan: Pendekatan kuantitatif, kualitatif, dan R&D. CV Alfabeta.
Supomo, I. (2016). Metodologi penelitian bisnis untuk akuntansi dan manajemen. BPFE Yogyakarta.
Prema S. (2021). A Decisive Role Played By Language in the Arena of Marketing and Advertisement: An Exploration of Ubiquitous Element, Asian Journal of Management, Entrepreneurship and Social Science, Vol. 1, Iss. 1, pp. 17-24.
Ghauri, P.N. (1986), Guidelines For International Business Negotiations, International Marketing Review, Vol. 3, No. 3, pp. 72-82.
Jeswald W. Salacuse. (2003), The Global Negotiator, Palgrave MacMillan.
Musa. Faridah. (2011), Negotiation skills: Teachers’ Feedback as Input Strategy, Procedia Social and Behavioral Sciences, Vol. 59, pp. 221-226.
P.J. Fos. (1991), A Method of Teaching Negotiating Skill, J Health Adm Educ. Vol. 9, Iss. 3, pp. 289-305.
Reardon, Kelly Kathleen. (1994), Starting our Right: Negotiation Lessons for Domestic and Cross-Cultural Business Alliances, Business Horizons, Vol. 37, Iss. 1, pp. 71-79.
Salacuse, Jeswald. (1991), Making Deals in Strange Places: A Beginner's Guide to International Business Negotiations, Negotiation Theory, and Practice. Eds. J. William Breslin and Jeffrey Z. Rubin. Cambridge, MA: The Program on Negotiation at Harvard Law School, pp. 251-260.
Published
2026-07-12
How to Cite
Gabeando Edgar, Rita Friyani, & Fitrini Mansur. (2026). The Impact of Audit Committees and Risk Monitoring Committees on Financial Reporting Quality: The Moderating Role of Internal Control. International Journal of Economics, Business and Innovation Research, 5(04), 3960-3972. https://doi.org/10.63922/ijebir.v5i04.4965
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