Comparison Of Local Government Audit Opinions Before And After The Covid-19 Pandemic: Implications For The Quality And Reliability Of Financial Reporting In Indonesia

Muhammad Hasbi Ash Shiddiqi; Liona Efrina; Havis Taufik; Eka Julianti Efris Saputri

doi:10.63922/ijebir.v5i06.7153

Muhammad Hasbi Ash Shiddiqi Adiwangsa University, Indonesia
Liona Efrina Adiwangsa University, Indonesia
Havis Taufik Adiwangsa University, Indonesia
Eka Julianti Efris Saputri Adiwangsa University, Indonesia

DOI: https://doi.org/10.63922/ijebir.v5i06.7153

Keywords: audit opinion, local government financial reporting, internal control system, COVID-19, Chi-Square, public sector accounting

Abstract

This study compares the distribution of audit opinions on Indonesian local government financial statements (LKPD) before and after the COVID-19 pandemic and examines changes in internal control weaknesses that may provide contextual explanations for the observed pattern. The study uses secondary data from the Audit Board of the Republic of Indonesia (BPK RI) and its Semester Audit Summaries (Ikhtisar Hasil Pemeriksaan Semester/IHPS) covering 2015-2024. The pre-pandemic period is defined as 2015-2019 and the post-pandemic period as 2020-2024. The quantitative analysis uses a Pearson Chi-Square test on 5,426 LKPD observations, while internal control weaknesses and non-compliance findings are examined descriptively and comparatively. The results show a significant difference in the distribution of audit opinions between the two periods (χ² = 246.172; df = 3; p < 0.001). The proportion of unqualified opinions (WTP) increased from 74.9% before the pandemic to 90.8% after the pandemic, while qualified opinions (WDP) declined from 21.6% to 8.4% and disclaimer opinions (TMP) from 3.4% to 0.7%. The effect size is nevertheless limited to small-to-moderate magnitude (Cramer’s V = 0.213). A Monte Carlo confirmation test also produced p < 0.001. Internal control findings reveal a more nuanced pattern: weaknesses in financial report preparation and incomplete procedures declined substantially, whereas weaknesses associated with improper policies causing lost revenue (+40.0%), higher costs (+55.6%), and non-compliance with available SOPs (+3.2%) increased. Non-compliance findings also increased notably in contract execution, expenditure compliance, honorarium payments, and asset control. Overall, the pandemic coincided with a statistically significant improvement in audit-opinion distribution, but this improvement did not eliminate operational internal-control risks. Audit opinion therefore provides an important external signal of reporting quality, while internal-control findings provide complementary information about the underlying quality of financial-management processes.

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