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Selamat Datang!
Welcome to the 16 th Annual Conference of the Asian Academic Accounting

Association

(4A).

We are delighted to be holding a 4A conference in Indonesia for the third time. Indonesia joins
Malaysia as the only countries with the distinction of hosting the conference three times.
The 4A was launched

in 1998 to serve as the professional

organization

for accounting

academics in Asia and beyond. It brings together colleagues from many countries to share their
research as well as to discuss pedagogical
to facilitate collaborations
an organization

and other issues of mutual interest. Our mission is

and programs to enhance accounting education and research. We are

of our members and for our members. I urge you to participate

in the current

activities of the 4A as well as to suggest additional programs and activities that are of interest
to you.
On behalf of the 4A Executive Committee and all 4A members, I thank our colleagues at the
University

of Indonesia for hosting this year's conference.

I particularly

thank Dr. Ancella A.

Hermawan

and her dedicated team of Organizing Committee members for their planning and

dedication

in putting together a superb conference.

I also take this opportunity

to thank our

sponsors, our keynote speakers and our honored guests.
I hope that you will take advantage of the wonderful program that they have arranged and take
the opportunity to renew acquaintances
professional
conference

with old friends, to make new friends, and to grow your

networks during the conference. I wish all participants

a productive and enjoyable

and visit to Indonesia.

Shahrokh M. Saudagaran
Secretary General, Asian Academic Accounting Association baZYXWVUTSRQPONMLKJIHGFEDCBA

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All praise and glory be to God for all His blessings upon us. We would like to thank the Asian
Academic

Accounting Association for letting us organize the event.

The 16th Asian Academic

Accounting

Association

(AAAA) Annual Conference

is held in

Bandung, West Java, Indonesia hosted by Universitas Indonesia. This year Annual Conference
addresses the latest issues in accounting covering wide research areas such as Corporate
Responsibility
Accounting,
Education,

and Corporate Governance, Financial Accounting and Reporting,
Auditing and Internal Controls, Management

Corporate

Finance and Capital Markets,

Public Sector Accounting, Forensic Accounting,

Accounting,

International

Taxation,

Social and Environmental

Islamic Accounting,

Social

Accounting

Accounting
Accounting,
Information

Systems, and Case Studies and Issues in Accounting. The conference brings together a diverse
group of accounting and finance educators and professionals

from throughout

Asia and the rest

of the world.baZYXWVUTSRQPONMLKJIHGFEDCBA
The Committee
conference.

received

136 paper submissions

and 88 papers will be presented

during the

We hope that this conference will bring positive and shared discussions

to enhance

the optimal outcome towards your research publications.
We hope that all of the participants could enrich their knowledge
atmosphere

as well as enjoy the beauty

of Bandung during the conference.

Dr. Ancella A. Hermawan
Steering Committee

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16

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ANNuAL

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A S IA N A C A D E M IC
A C C O U N T IN G

A S S O C IA T IO N

O R G A N IZ IN G
S T E E R IN G

C O M M IT T E E

Dr. Ancella A. Hermawan, CA

C O M M IT T E E

Prof. Siddharta Utama, Ph.D., CFA
Prof. Akhmad Syakhroza, Ph.D., CA
Prof. Dr. Lindawati Gani, CA NMLKJIHGFEDCBA

C H A IR

Dr. Dyah Setyaningrum

VICE CHAIR

Selvy Monalisa, MBA, CA

C O M M IT T E E

M E M B E R S baZYXWVUTSRQPONMLKJIHGFEDCBA
Elvia R. Shauki, PhD

Christine, M.Int.Tax, CA
Desti Fitriani, MA, CA
Rahfiani Khairurizka, MAce, CA
Agustin Setyaningrum, M.S.Ak., CPMA
Rallyati, MAk, CA
Edward Tanujaya, MBA, CA
Elfina A. Sambuaga, M.S.Ak.
Nur Aulia Rahmah, MSc
Luluk Widyawati, MBus
Nurul Husnah, M.S.Ak., CA
Teguh Iman Maulana, M.S.Ak., MSc
Panggah Tri Wicaksono, MSc
Dian Nastiti, MCom, CA
Rafika Yuniasih, M.S.M., CA
Dahlia Sari, M.Si., CA
Desi Adhariani, PhD, CA

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Moderator:
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The Impact of Ethics

Education

on Earnings

Management

Judgment:

A Quasi-Experimental

Approach
M a h fu d

S h o lih in ,

Ahm ad

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Assessing

G a d ja h

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U n iv e r s ity

U n iv e r s ity

M ada

U n iv e r s ity

Employability:

Perception

of Employers,

Junior

Auditors,

Lecturers

and

Students
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D ia n

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U n iv e r s ita s

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Accounting

Students'

In d o n e s ia

In d o n e s ia

U n iv e r s ita s

Perception

In d o n e s ia

of the Benefits of Student Centered

Learning

Methods

to Soft

Skills Development
Rahm i

S e p tia n i

D yah

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U n iv e r s ita s

S e ty a n in g r u m ,

Legitimizing
E lv ia

In d o n e s ia

U n iv e r s ita s

In d o n e s ia

Higher Degree Actions in Enhancing

S h a u k i,

U n iv e r s ita s

Sharon

Y a m , U n iv e r s ity

A n c e lla

H erm aw an,

Graduate Employability

In d o n e s ia /U n iv e r s ity

o f S o u th A u s tr a lia

o f S o u th A u s tr a lia

U n iv e r s ita s

In d o n e s ia

I-D Auditing Issues
Moderator:
•

Dr. Ancella A. Hermawan,

The Determinants
Agung
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N ur P robohudono,
N anda

Government

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U n iv e r s ity

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Evidence from Indonesia

U n iv e r s ity

U n iv e r s ity

of Settlement Audit Recommendation

H a r ta n to ,

S e b e la s

M aret

N ur P robohudono,

Review of Money Laundering
Z u r a id a h

M ohd

N o r a z id a

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N oor

In d o n e s ia

Auditors Ethical Decision-Making:

A ri K uncara

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Issu es

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Impression

Management

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A c c o u n tin g

U n iv e r s ity

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in Indonesia

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of Local Government:

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on Local

Government

Characteristics,

and Financial Condition

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A ri K uncoro

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Distress

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and Governance

as Moderating

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with Country

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M ada

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W ahyu

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S e b e la s

S a r d jo n o ,

A ri K uncara

M aret

S e b e la s

W id a g d o ,

U n iv e r s ity

U n iv e r s ity

M aret

U n iv e r s ity

S e b e la s

M aret

U n iv e r s ity

19.00 - 22.00

Gala Dinner and Cultural Performances

08.00 - 08.30

Registration

08.30 - 10.00

Concurrent Session 3

3-A Earnings Management Issues
Moderator:
•

Dr. Budi Frensidy,

The Effect

of Bali Bombing

Management

Practices

Companies

In d o n e s ia

I, Bali Bombing

in Transportation

II, And Mega Kuninga~

Sector

and Hotel,

Bombing

Restaurant,

and

on Earnings

Tourism

Sector

in Indonesia

Jauza

A z a r ia ,

U n iv e r s ita s

D e s i A d h a r ia n i,

•

Berlian 1 Room

U n iv e r s ita s

In d o n e s ia

U n iv e r s ita s

In d o n e s ia

Earnings Breaks and Earnings Management
O w Y o n g , S in g a p o r e M a n a g e m e n t U n iv e r s ity
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Beating Earnings Threshold Targets with Earnings Management
P radyot
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M in d a k ,
S te p h a n ,

The Association

D eP aul

o f W a s h in g to n

B o th e ll

U n iv e r s ity

U n iv e r s ity

o f E a s te r n

M ic h ig a n

between National Culture and the Earnings Management:

The Study in ASEAN

Five
A ryana

S a tr y a ,

A n c e lla
R a fik a

A . H erm aw an,
Y u n ia s ih ,

D ahyang

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U n iv e r s ita s

U n iv e r s ita s

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In d o n e s ia
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A p p r o a c h nmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCB

Mahfud Sholihin
Eko Suwardi
Ahmad Zaki
Accounting Department
Faculty of Economics and Business
Universitas Gadjah Mada, Indonesia

P repared

fo r th e 1 6 th A sia n A c a d e m ic
B andung,

A c c o u n tin g

1 6 -1 8 N o v e m b e r

A sso c ia tia o n

C o n fe r e n c e

2015

Correspondence:
Mahfud Sholihin
Accounting Department, Faculty of Economics and Business, Universitas Gadjah Mada
JI. Sosio Humauiora No.O 1, Bulaksumur, Yogyakarta 55281, Indonesia
Telp: +62 274 548510
Fax: +62 274 563212
Entail: mahfud@ugl11.ac.icl

T h e Im p a c t o f E th ic s E d u c a tio n

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Earnings Management, Ethics Education, Quasi-Experiment

2

1.

In tr o d u c tio n nmlkjihgfedcbaZYXWVUTSRQPONMLKJIHGFEDCBA

One of the emerging topics in earnings management

is ethical or unethical activity (Bruns & Merchant,

question whether earnings management

1990; Merchant & Rockness, 1994; Fisher & Rozenzweig,
& Rockness (1994, p. 92) argue that earnings management

as samples

practices varied significantly.

judgements

controllers,
exist among

practitioners, undergraduate

is "probably

found that the judgment

the most important

about

earnings

management

Following Bruns & Merchant (1990), Merchant & Rockness

(1994) studied earnings management
operating-unit

1995; and Elias, 2004). Merchant

Bruns & Merchant (1990) conducted a study

ethical issue facing the accounting profession".
using 649 managers

research relates to answering

judgment

and internal
samples.

among general managers,

auditors.

Their

study

Fisher & Rozenzweig

staff managers,

concludes

(1995)

that difference

found that attitudes

of

students, and graduate students were noticeably different among

types of earnings management.

Elias (2004) found that Cl'As employed in organizations

high (low) ethical

viewed

standards

earnings

management

activities

with

as more unethical

(ethical). They also found that significant differences on the perception of corporate ethical
values based on gender,
conducted

age, job

an experimental

different group has different

title and other demographic

study involving

MBA students

ethical judgement

accounting issue, he finds that individual'
Unlike the previous aforementioned

on earnings

factors.

Kaplan

(2001)

found mixed results on why
management.

In relation

to

role is likely to influence the ethical judgement.
research, this study examines the impact of ethics

education on earnings management judgement.

Among studies related to ethics education are

Enyon ct al. (1997), Gaustchi III & Jones (1998), Wu (2003), Desplaces

et al. (2007), and

Mayhew & Murphy (2009). Whilst previous

results that ethics

studies provide empirical

education gives positive effect on ethics recognition ability (Wu 2003) and ethical decisionmaking skills (Greenfield .Ir et al. 2008), to the best of our knowlwdge,

the impact of ethics
3

education on earnings management judgment,

however, is remained unstudied. The topic is

important to study as Bedford et al. (1986) and Langenderfer
ethics education development

& Rockness (1989) argue that

is arguably a pressing need for decades to combat earnings

management.

Using quasi-experimental
earnings management
earnings

design,

ethical judgment.

management

differently

we investigate

whether

ethics education

affect

Particularly, we examine whether participants judge

before and after they do Business

Ethics (BE) course.

AddionaIIy, we also compare those who take BE course and those who do not take it. We
argue that students

who join BE course judge

completing the course. Additionally,

earnings

management

more harshly after

we argue that students who did not take BE course are

more permissive with earnings management practice.
This study contributes to the earnings management literature, particularly in providing
evidence whether ethics education

affects judgment

previous studies on ethics education
ethics education on ethics judgment,

towards earnings management.

showed consistent

Whilst

findings on the positive impact of

to the best of our knowledge, none has investigated

its

impact on earnings management judgment.

2. Literature Review and Hypothesis DevelopmentXWVUTSRQPONMLKJIHGFEDCBA
2 .1 .

E a r n in g s

A number

m anagem ent

of studies

a n d its e th ic a l

on earnings

is s u e s

management

have shown

that researchers

considerable attention on the topic. To define earnings management,
to Schipper (1989, p.92) who defined it as "purposeful

intervention

have put

many researchers

in the external financial

reporting process, with the intent of obtaining some private gain". More specifically,

& Rozenzweig (1995, p.434) referred earnings management
serve to increase (decrease)

in the long-term

economic

refer

Fisher

as "actions of manager which

profitability

of the unit". As the

4

previous research described a range of management reasons for doing earnings management
(Healy & Wahlen, 1999), it is clear that most of managers and their accounting staffs see
earnings management as part of managers' job (Bruns & Merchant, 1990). The reasons may
consider for personal benefit, company benefit, or both (Greenfield,

In
Jr et al., 2008).LKJIHGFEDCBA

general, Merchant (1989) classified this action into two types of manipulation:

operating

manipulations which is related to modifying operating decisions to affect cash flows and net
income lor a period; and accounting manipulations which deal with using the flexibility in
accounting standards to alter earnings numbers.
Research on the ethics of earnings management has initially introduced by Bruns &
Merchant (1990). Using questionnaire developed through discussion with operating managers
and controllers, they formulated

13 common earnings management

questions dealt with operating manipulation

and seven questions

scenarios consisted six
dealt with accounting

manipulation. In their study, using 649 managers as sample, they found that the judgment
about earnings management
(1990) study, some studies

practices varied significantly.

Following Bruns & Merchant

in the topic showed variety of evidences to support whether

earnings management is an ethical (unethical) activity. Merchant & Rockness (1994) assessed
general managers, staff managers, operating-unit controllers, and internal auditors prevailing
morality regarding earnings management

practices. Their study concludes that difference

judgements exist among sample. However, there are some areas of agreement on type, size,
timing, and purpose of action while significant

areas of disagreement

were still exist.

Moreover, Fisher & Rozenzweig (1995) found that attitudes of practitioners,
students,

and graduate

students

were

noticeably

different

among

undergraduate

types of earnings

management.
While some research on ethics issues of earnings management provide mixed results,
others tend to be more unified. Using 583 certified public accountants

(CPAs) in public
5

accounting,

industry, and academia

employed in organizations

in more recent studies, Elias (2004) found that CPAs

with high (low) ethical standards viewed earnings management

activities as more unethical

(ethical). They also found that significant

differences

on the

perception of corporate ethical values based on gender, age, job title and other demographic
factors. Furthermore, assessing the impact of ethics orientation and professional
on earnings

management

equation modeling
intimate connection
management.

behaviour,

Greenfield,

using 376 undergraduate

commitment

Jr et al. (2008) have applied

students

structural

in U.S. and found that there is an

between personal ethical orientations

with decision making in earnings

In addition, Shawver & Clements (2014) in most recent study concluded

there is no obvious difference

between male and female accounting

professional

that

when they

make an ethical evaluation involving earnings management.XWVUTSRQPONMLKJIHGFEDCBA

2 .2 .

E th ic s

a n d A c c o u n tin g

E d u c a tio n

Recent studies on ethics education in accounting are those of Enyon et al. (1997), Gaustchi
III & Jones (1998), Wu (2003), Oesplaces et aI., (2007), and Mayhew & Murphy (2009).
Desplaces el al. (2007) investigated

the role of university

codes of ethics, perception

ethical culture, academic pressure, and ethics pedagogy on moral development
Their results suggest that ethical codes and student perceptions

of

of student.

of such codes affect student

perceptions of the ethical nature of the cultures within this institution, while discussion about
ethics in business courses is significantly
student.

and positively linked to moral competence

Mayhew & Murphy (2009) in their study in MEA program

among

have compared

the

students who joined ethics program with those who did not. They found that ethics education
impact ethical behavior as misreporting

dropped dramatically

for those who joined ethics

program when the behavior is publicly disclosed. However, individual misreport remains at
the same rate when anonymous.

6

Previous studies seem to give a same direction.

Applying DIT in measuring

reasoning, Enyon et al. (1997) found that accounting professionals
course in college

had a higher

level of moral reasoning

moral

who completed an ethics

abilities.

Using undergraduate

students in American schools of business, Gaustchi III & Jones (1998) result demonstrate that
completing course in business ethics increase students ability in recognising
Furthermore,
significant

ethical issues.

Wu (2003) in his research on 126 business ethics students in Taiwan found

improvements

in the ethical weighting of students'

individual values, students'

recognition of ethical issues and students performance as ethical decision-makers.
Some researches on ethics education in accounting provide different result compared
to those positive results (e.g., Weber, 1990 and Adkins & Radke, 2004).

Assessing ethical

awareness and reasoning skill, Weber (1990) found the teaching course and ethics did not
have a positive and short-term

improvement

argued that there is a slight agreement

on students

while Adkins & Radke (2004)

over the effectiveness

of business ethics education.

Therefore we hypohesise:

HO 1: There is no different judgement

on earrungs management

before and after

students doing business ethics course.

HOl: There is no different judgement on eamings management between students who
do and do not do business ethichs course.

3. Research Design
This study involves an experiment

using MBA program students in a major university

Indonesia as the subject. The students

of this program

experiences. Through their work experience
generally familiar with work environment

typically

have substantial

and previous coursework,

in

work

MBA students are

and its ethical issues. Thus, this group appears to
7

be reasonably

representative

of a relatively knowledgeable

group of professional

business

people.
Data are collected by means of a questionnaire
questionnaire,
earnings

which is adapted from Bruns & Merchant

management

measurements
management

administered

scenarios.

Accordingly,

showing managers judgement
(type of actions; consistency

these

to the participants.

(1990) consists of 13 common
scenarios

on six dimensions

are

grouped

unethical

(5). Since

into

12

of ethical issues in earnings

with GAAP; earnings management

earnings materiality; period of effect; and earnings purposes). The participants
rate the ethical acceptability

The

directions;

were asked to

of the actions on a five-point scale from very ethical (1) to very

this study

management, questionnaires

compare

the impact

of ethical

education

on earnings

are distributed twice; the first meeting before starting the class

and the last meeting after the conclusion

of the class, both for the experimental

controls group. Our final sample consists of 93 participants

group and

for both pre-test and post-test

with 47 for experiment group and 46 for control group.
To find differences

on participants'

ethical judgement

on earnings management,

data are analysed using mixed ANOV A as it combines repeated-measures

the

and independent

design.

4. Findings and Discussions
Table I illustrates the mean responses on every dimension
experiment-control

showing the changes made by

group participants; pre-test - post-test. On average, there is no significant

difference between experimental

group and control group in their pre-test means score (the

difference is around 0.093) among all items, as the deviation standard also only has very little
difference.

8

Table 1. Descriptive

statistics for experiment data and control group pre-test - post-test
(n=47 for experiment and n=46 for control group)
Business

Dimension

ethics course

BE course
pre-test
post-test

No BE course
post-testXWVUTSRQPONMLKJIHGFEDC

pre-test

T v p e o fa c tio n s

2.71
(0.73)
2.30
(0.53)

2.86
(0.57)
2.35
(0.54)

2.63
(0.56)
2.30
(0.56)

2.58
(0.68)
2.39
(0.56)

2.35
(0.85)
2.98
(0.78)

2.55
(0.84)
3.10
(0.67)

2.03
(0.79)
3.09
(0.67)

2.33
(0.93)
2.67
(0.74)

2.58
(0.56)
2.21
(0.64)

2.69
(0.50)
2.41

2.57
(0.4 7)

(0.60)

2.53
(0.51 )
2.31
(0.65)

2.25
(0.78)

Material

3.43
( 1.17)

3.45
(1.10)

Immaterial

2.94
( 1.19)

2.87
(1.01)

3.28
( 1.00)
2.83
(0.93)

3.17
(0.93)
2.59
( 1.00)

Year end

2.60
(1.06 )

2.74
(1.01)

2.80
( 1.05)

2.46
(1.05)

Quarter end

2.51
(0.95)

2.60
(0.99)

2.52
(1.11)

2.37
(0.95)

Company long-term purpose

2.26
(1.05)

2.28
(1.04)

1.83

Manager purpose

2.17
( 1.03)

2.64
( 1.15)

2.33
(1.08)
2.24
( 1.12)

Total average

2.587

2.712

Accounting method
Operating method
C o n s is te n c y

w ith

GAA P

Consistent
Inconsistent
E a r n in g s

d ir e c tio n s

Increase earnings
Decrease earnings
E a r n in g s

P e r io d

m a te r ia litv

o f e ffe c t

E a r n in g s

purposes

( \.00)
1.78
(0.94)
2.494

Table I also gives details on means score comparing participants'
items describing the ethical issues on earnings management
Generally, participants

2.496

judgements

within the experimental

on 12
group.

show substantial increase in their post-test means score compared to

the pre-test as the earlier present smaller average compared to last. The largest increase on
participants'

ethical judgement

is on purpose of doing earnings management

particularly

on

"manager purpose" (pre-test means score is 2.17; post-test means score is 2.64. Interestingly,
further finding shows negative impact of BE course to participants'
respondent's

means score, earnings management

judgement.

According to

activity that gives immaterial

changes is

9

scored lower than the pre-test score for about -0.07. The rest items in earnings management
dimension have higher post-test means score.
In addition, comparing the average between experimental

and control group post-tests

means score, we find that the group joining BE course has 0.216 means score over the control
group. According to the result, there is a significant decrease on control group response from
the pre-test. Hence, this finding supports previous comparison

on how BE course supports

respondents' judgement on this topic.
As the purpose of this study is to see whether participants judge earnings management
differently

before

and after

significance level of difference

doing

BE course,

on participants'

table 2 provides

about

the

response. This result shows the interaction

between time (pre-test - post-test) by group samples (experiment
12 items established

information

- control). In detail, out of

in this study, changes in means score on two tests in both samples

(experiment and control) are surprisingly

significant in one item, inconsistency

with GAAP

while the rest vary from 0.10 to 0.97. In another word, the result shows that the pre-test and
post-test of experiment group ethical judgement

is only significant on the inconsistency

with

GAAP issue.
Determining

the robustness

of our findings, we perform

further test using paired-

samples t-test for every items studied. Our findings give the same direction to the previous
analysis. We find that inconsistency

with GAAP is the only item which has significant

difference between pre-test and post-test (p