The International conference on Competitiveness of the Economy will be held on 10 – 11 February 2012 at University of Bung Hatta, Padang, West Sumatra, Indonesia

Affecting Factors BPK’s Audit Opinion 1

Deboner Hillery, 2Dini Tri Wardani, 3Dini Yartiwulandari, 4 Teddy Oswari, 5Didin Mukodin 1,2,3,4

Faculty of Economics, Gunadarma University ([email protected]), 2([email protected]) 3 ([email protected]), 4([email protected])

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Abstract BPK is an institution that has the authority to audit all government institutions in Indonesia that will finally give an opinion on the fairness of the audit object to the Parliament. This paper is made by identifying the 45 district-level financial statements in the province of Aceh, North Sumatra, Central Java, Central Sulawesi and Papua in 2007. The purpose of this study was to identify whether a violation of internal control (IC), violations of the Act, and materiality are all factors that affect the BPK’s audit opinion. The results of this study is that the materiality is one of the factors that most influence the BPK’s audit opinion in the province of Aceh, North Sumatra, Central Java, Central Sulawesi and Papua. Keywords: violations of IC, violations of the Act and Materiality BACKGROUND Reforming public finance, including local finance, is the mandate of the Act that must be carried out best by the Central Government and Local Government. Principles of financial management to effectively and efficiently is a precondition that the government must be met in order to provide appropriate services to suit the needs of the community. Local government financial statements are made to provide relevant information regarding the financial position and all transactions made by the local government budget for a given period. Local Government Financial statements are prepared by the Pejabat Pengelola Keuangan Daerah (PPKD), based on the financial statements that have been prepared by the Satuan Kerja Perangkat Daerah (SKPD) as budget user. The report is submitted to the Head of region and then forwarded to the BPK for examination in financial statements whether the financial statements of the local governments have been presented fairly in all material respects on the realization of the budget, financial position, cash flows and notes to the financial statements in accordance with Standar Akuntansi Pemerintahan (SAP) and consistently applied. Compliance with the legislation which applies also to assess the effectiveness of internal control systems that have been designed by the local governments concerned in order to award the BPK’s audit opinion. The form and content of financial statements should be prepared and presented in accordance with Akuntansi Pemerintahan (SAP). The Head of region must also design and implement accounting systems as well as full responsibility for the accuracy of these financial statements. Head of region must make a written statement that the financial statements based on Internal Control System that adequately and in accordance with Governmental 1

The International conference on Competitiveness of the Economy will be held on 10 – 11 February 2012 at University of Bung Hatta, Padang, West Sumatra, Indonesia

Accounting Standards, due to limited data then this paper has made the financial report based on 45 districts had spread in Aceh Province, North Sumatra, Central Java, Central Sulawesi and Papua. The purpose of this study is to identify factors that influence the BPK’s audit opinion. Previous research on factors that affecting BPK’s audit opinion on the financial report within the department in Jakarta ( By Sunarsih, 2009) suggests that the materiality, weakness in internal control, SAP violation and disobedience of the law in a linear effect on the audit opinion given by the BPK. RESEARCH METHOD This study uses secondary data that obtained from the BPK’s website in the form of 45 district-level financial statements in Aceh Province, North Sumatra, Central Java, Central Sulawesi and Papua and years of observations is 2007. This study used random sampling techniques due to limitations of the data. This study uses regression methods to identify whether a violation of IC, violations of Act and materiality are the determinants factors of BPK’s audit opinion. Dependent variable of this study is the result of BPK’s audit opinion by using proxy audit opinion that is made in intervals of 1 to 4 which comprises: (1) unqualified (2) qualified, (3) adverse, (4) disclaimer. While the independent variables in this study there are three, namely: Violation of Internal Control System, Indicators used to measure whether the internal control violation designed by local governments already provide reasonable assurance regarding the achievement of the objectives of local government which is reflected in the reliability of financial reporting, efficiency and effectiveness of programs and activities and compliance with laws and regulations. Internal controls are at least must meet the following criteria: (a) the creation of a sound control environment, (b) the implementation of risk assessment, (c) implementation of control activities, (d) implementation of information and communication systems, and (e) implementation of control monitoring activities . Internal control related to financial statements are: (a) relating to financial records, (b) provide reasonable assurance that the report is in compliance with Governmental Accounting Standards, as well as revenues and expenditures are in accordance with the authorization given, (c) provide confidence adequate for the security of assets which have a material impact. The district government is the party who responsible for organizing and conducting such control. Violation of law (the Act), Indicators used to measure the violation of Act is to check whether there are things that are material from non-compliance such as failure to comply with the Act requirements, or violations of prohibitions, contained in laws, regulations, contracts, and aid requirements. Based on the results of BPK’s audit finding. Materiality (nominal amount of violations in the Rupiah), Indicators used to measure the nominal amount by plus the violations, especially violations of the nominal system of internal controls and violations of law by the District based on the results of BPK’s audit findings in 2007 and make the interval of the offense from 1 to 5. Research hypotheses are: H1 = Violations of system of internal control may affect the results of BPK audit opinion. H2 = Violations of law may affect the results of BPK audit opinion. H3 = Materiality can affect the results of BPK audit opinion. H4 = Violations of system of internal control, violations of laws and the materiality can affect the results of BPK’s audit opinion.

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The International conference on Competitiveness of the Economy will be held on 10 – 11 February 2012 at University of Bung Hatta, Padang, West Sumatra, Indonesia

RESULT AND DISCUSSION Samples obtained in this study as many as 45 districts in Aceh Province, North Sumatra, Central Java, Central Sulawesi and Papua. Here are the data from each district as an object of research. Table 1. Data of research in district government in province Aceh Province, North Sumatra, Central Java, Central Sulawesi and Papua No District IC Law Materiality (Rp) Opinion Mandailing Natal 1 8 14 921.604.397.248 4 2 Batubara 2 3 19.739.389.018 2 3 Karo 4 7 437.568.924.830 4 4 Tapsel 5 11 1.304.767.057.569 2 5 Pak-pak Barat 8 14 37.113.238.893 2 6 Dairi 4 19 144.142.090.977 4 7 Simalungun 6 14 2.094.090.347.440 4 8 Tapteng 3 19 115.073.430.591 2 9 Toba Samosir 6 9 693.942.563.322 4 10 Nias 9 7 1.723.883.029.549 4 11 Langkat 5 8 1.559.905.959.844 4 12 Labuan Batu 9 15 2.580.657.269.114 4 13 Nias Selatan 10 7 883.939.170.441 4 14 Aceh Besar 8 19 573.360.215.798 2 15 Pidie 4 16 23.022.046.672 2 16 Bireun 5 10 20.654.214.576 2 17 Aceh Barat 2 20 234.198.673.079 2 18 Simeulue 3 13 456.093.702.315 2 19 Aceh Jaya 2 9 129.888.100.017 2 20 Nagan Raya 5 14 540.117.931.002 2 21 Aceh Barat Daya 0 11 58.754.892.004 2 22 Aceh Selatan 5 17 189.866.927.668 2 23 Aceh Singkil 3 9 15.095.553.533 2 24 Aceh Timur 3 12 794.709.891.874 4 25 Aceh Utara 6 10 74.810.847.560 2 26 Aceh Tengah 2 9 30.395.014.156 2 27 Bener Meriah 2 9 269.693.623.743 2 28 Gayo Lues 4 9 18.966.747.457 2 29 Aceh Tenggara 5 20 29.502.346.040 4 30 Aceh Tamiang 4 12 83.960.363.639 4 31 Grobogan 7 11 51,243,736,398 2 32 Banyumas 8 7 22,152,153,218,438 4 3

The International conference on Competitiveness of the Economy will be held on 10 – 11 February 2012 at University of Bung Hatta, Padang, West Sumatra, Indonesia

No District IC Law Materiality (Rp) 33 Kebumen 4 7 12,658,577,081,474 34 Brebes 7 6 19,161,364,910 35 Rembang 6 16 9,190,357,085 36 Mamasa 14 18 81,105,424,590 37 Mamuju 9 10 909,746,255,225 38 Mamuju Utara 12 15 396,251,591,999 39 Majene 9 10 130,314,739,600 40 Palopo 2 10 287,637,403,921 41 Keerom 6 8 29,318,312,363 42 Mappi 4 8 92,573,000,000 43 Merauke 4 9 4,104,920,000,000 44 Mimika 5 7 1,546,990,000,000 45 Nabire 5 6 1,075,270,000,000 Source: BPK, 2007 and modified in 2010

Opinion 2 2 2 4 2 2 2 2 4 4 4 4 2

Descriptive statistics try to explain or describe each of the variables involved in this study. Descriptive statistics presented in table 2 as follows. Table 2. Descriptive Statistics N Minimum Maximum Mean SPI 45 .00 14.00 5.422 UU 45 3.00 20.00 11.4222 Nominal 45 1.00 5.00 2.4222 Opini 45 2.00 4.00 2.8000 Valid N (listwise) 45 Source: Modified data in 2010

Std. Deviation 2.8721 4.3300 1.68535 .99087

Hypothesis testing in this study using multiple regression analysis because regression analysis is used to examine the influence of independent variables on the dependent variable. Multiple regression equation form in this study using the model as follows: y = α + β 1 x1 + β 2 x 2 + β 3 x 3 + β 4 x 4 Table 3. Test of Goodness of Fit Model R R Adjusted R Square Square 1 .455a .207 .149 Source: Modified data in 2010 Hypothesis testing in Table 3 shows the adjusted R square of 0.149 which means that 14.9% of dependent variables BPK’s audit opinion can be explained by the independent variables violations of IC, violations of the Act and the materiality (nominal amount of violations). The remaining 85.1% is explained by factors other than regression models.

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The International conference on Competitiveness of the Economy will be held on 10 – 11 February 2012 at University of Bung Hatta, Padang, West Sumatra, Indonesia

Table 4. t-Test Model B 1 (Constant) 1.818 SPI .058 UU .009 Nominal .231 Source: Modified data in 2010

Std. Error .517 .051 .034 .089

Beta .167 .041 .393

t 3.517 1.143 .278 2.598

Sig. .001 .260 .783 .013

Table 4 above suggests that hypothesis 1 is rejected. As the Regulation No. 22 in 2006 about the Principles of Financial Management, established in Article 199 in order to improve performance, financial management and accountability transparence area, Regent arrange and conduct the internal control system within the government he leads. In this study there is the existence of an adequate system of internal control, although there are still violations of the IC, but can still be tolerated because it can still be fixed by the relevant local authorities. Hypothesis 2 was rejected. BPK checking whether there are things that are material from non-compliance such as failure to comply with the Act requirements, or violations of prohibitions, contained in laws, regulations, contracts, and aid requirements. The results of this study showed that 45 local governments at district comply, in all material respects, of certain articles of the laws, regulations, contracts, and provided assistance as mentioned above. Although there are violations of the Act but are still considered within normal limits or could be tolerated by the BPK because it does not provide a material impact. Hypothesis 3 is accepted, then the number of violations of the nominal rupiah / materiality has exceeded the limit set by the BPK that is between 2% -5% of the total amount of budget funds, as the number already exceeds the limit violation of BPK’s materialists then automatically provide an disclaimer opinion.

Model 1 Regression Residual Total

Table 5. F-Test Sum of df Mean Squares Square 8.932 3 2.977 34.268 41 .836 43.200 44

F

Sig.

3.562

.022a

Source: Modified data in 2010 Hypothesis 4 in this study is received. This indicates that simultaneous variable of violation in IC, violation of the Act and materiality (nominal amount of violation) effect on the results of BPK audit opinion. RESULTS Violation of IC, Law and materiality simultaneously affects the BPK’s audit opinion on 45 districts in Aceh Province, North Sumatra, Central Java, Central Sulawesi and Papua. Variable that most affects the BPK audit opinion in 45 districts is materiality. As a solution we propose to local government district level to address 5

The International conference on Competitiveness of the Economy will be held on 10 – 11 February 2012 at University of Bung Hatta, Padang, West Sumatra, Indonesia

weaknesses in violation materiality and financial statement to obtain a quality and reliable can be generated with the implementation of a regional financial accounting information system that integrates with other systems in the areas of financial management and establish good internal control for the local government and implement the system of punishment and reward. Human resources/ district level civil employee must be given an understanding of the importance of regional financial statements which is reliable, the users of financial statements (stakeholders) should also understand the roles and functions and how to utilize local government financial statements. Elements of society must also understand the flow of the global system so that they will be more aware of their rights and obligations. REFERENCES Arens dan Loebecke. (1996). Auditing Pendekatan Terpadu. Edisi Indonesia. Jakarta: Salemba Empat. Badan Pusat Statistik. (2010). ‘Audit Annual Report 2006 and 2007’ www.bpk.go.id ( acessed January 2010) Kuncoro, Mudrajat. (2004). “Regresi Logistik dan Diskriminan”. [http://docs.google.com/pakJ:mudraja.com/upload/Quantitativemethod/Kuliah %regresi%ogisik%dan%diskriminan.pdf] (accessed March 2010) Nicols. (2008). “Multinomial dan ordinal pada data nilai UNAS SM”. [http://blog.its.ac.id/nicols/2008/06/21/multinomial-dan-ordinal-pada-datanilai-unas-smp/] (accessed 24/03/2010 09.15) Nicols. (2008). “ Olah Data Uji Normalitas Dengan Menggunakan Uji Kolmogorov Smirnov”. [http://www.wahana-statistika.com/olah-data/spss/143-olah-data-ujinormalitas-denganmenggunakan-uji-kolmogrov-smirnov.html] (acessed 24/03/2010 09.00) Sunarsih. (2009). ‘Faktor-faktor yang Mempengaruhi Opini Disclaimer BPK Terhadap Laporan Keuangan Di Lingkungan Departemen di Jakarta”. Skripsi Universitas Gunadarma. Jakarta. Tarmana, Dede. dan Sarasanti. (2009). “Penggunaan Model Logit Untuk Menduga Peluang Terjadinya Hujan”. Buletin Meteorologi Klimatologi Dan Geofisika. Vol. 5 No. 3 (September): 7. Undang-Undang PERDA No.22 tahun pasal 199 tahun 2006. Undang-Undang No. 1 Tahun 2004 Tentang Perbendaharaan Negara Pasal 51 Ayat (2). Undang-Undang No.15 Tahun 2004 Tentang Pemeriksaan Pengelolaan Dan Tanggung Jawab Keuangan Negara. Wiliandri, Yuciana. dan Safitri Diah. (2009). “Analisis Faktor-Faktor Yang Mempengaruhi Kesembuhan Penyakit Flu Burung”. Media Statistika , Vol. 2, No. 1, (Juni): 11-18.

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