AUDIT : Public Sector Performance

AUDIT : Public Sector Performance

During this time, the public sector often receives accusation as a hotbed of corruption, collusion, nepotism, inefficiency and waste of state the source of. Complaints of "bureaucrats can not afford to do business" is intended to criticize the poor performance of public sector companies. Government as a public-sector organizations were not immune from these accusation. Organizations sector public are the institutions that run the government with a source of legitimacy that comes from the public. Therefore, the public trust given to the government must be balanced with a clean government.

Good governance is characterized by three main pillars that the basic elements that are interrelated (Prajogo, 2001). The three basic elements are participation, transparency and accountability. A good government should open the door as wide as possible so that all parties involved in government and to participate actively to oversee the running of the government that must be held in a transparent and its implementation should be accountable. In the language of accounting, accountability (ability to give responsibility) is the basis of financial reporting (Wilopo, 2001). Financial reporting by government is important role in order to fulfill the task of government that accountability to the public in a democratic society.

In a democracy, "the transparency of financial reporting" is something that is demanded by the public to the government. Conversely, in a democracy, the government is obliged to provide transparent financial statements to the public. A democratic government should be responsible for the integrity, performance and management, so the the government should provide useful information to assess accountability and assist in decision making on economic, social and political. Government is the reporting entity that must be make a financial report with the following considerations (Faiz, 2000):

- The government owns and controls the significant resources.

- The government that use of these resources should be far-reaching impact on the economic welfare of the people.

- There is a separation between management and ownership of of these resources.

Accountability refers to responsibilities individuals, groups or organizations that should implement a compliance authority and responsibility. The mandatory are included:

- Answering, attempt to provide an explanation or justification for the implementation and fulfillment of responsibilities.

- Reporting, reporting the results of the implementation and fulfillment of responsibilities.

- Producing, assumptions on the results achieved.  

Organizations sector public have to maintain the quality, professionalism, accountability and value for money in carrying out its activities. Audit of public sector organizations are required to ensure that accountability has been done by public sector organizations. Implementation of audit is not only limited to financial and compliance audit, but should be expanded with conduct audits of the performance of public sector organizations. [Bajuri & Trihapsari]

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Healthy | Smart | Rich, at: 5/21/2012

Agency Conflict

Agency Conflict

Companies that separating the functions of management and ownership will be vulnerable to agency conflicts. On agency theory designed a system that involves two parties, namely the management and owners. Furthermore, management and owners make an agreement (contract) work to achieve the expected utility. Lambert (2001) states that the agreement is expected to maximize the utility owner (principal), and can satisfy as well as ensure management (agent) to receive the reward. The benefits received by both parties based on company performance. In general, the company's performance is measured by profitability (Penman, 2003). The amount of income (profit), then informed by the management to the owners through the financial statement presentation.  

Ohlson (2006) states that financial accounting is important in the measurement (measurement) through approach to the balance sheet (balance sheet) or the approach income statement (income statement). At the balance sheet approach, accounting rule determine the value on the balance sheet, and leads to changes in the value of of revenue and expenses measurements. While the income statement approach is to determine directly of revenue and expenses, and it will be useful to update the balance sheet value of previous period.

In accordance with agency theory, motivation of management can be grouped into two categories: opportunistic and signaling (Beaver, 2002). In the opportunistic motivation, management through the aggressive accounting policies generate higher returns than real profits. If earnings report can not describe the real profit, it will lead to overstate earnings that resulted in profits become blur (opaque). The blurring of profit (earnings opacity) implies that the accounting profit can not describe the true economic profit. The policy was made ​​by management, as they relate to compensation under the contract agreed upon with the owner.

In the signaling motivation, management presents financial information (particularly income) is expected to provide a signal of wealth to shareholders. Earnings reports that could provide a signal of wealth is growing and profits are relatively stable (sustainable). Penman and Zhang (2002) states that sustainable earnings are earnings that have a high quality and as an indicator of future earnings, and hereafter referred to as the persistence of earnings (Sloan, 1996; Dechow and Dichev, 2002; Francis, Lafond, Olsson and Schipper, 2004). (Sunarto)

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Healthy | Smart | Rich, at: 5/14/2012

Good Corporate Governance (GCG)

Good Corporate Governance (GCG)

Corporate governance is a concept that can be used to improve economic efficiency, which includes a set of relationships between the company's management, board of directors, shareholders and other corporate stakeholders.  

Corporate governance also provides a structure that facilitates the determination of the goals of a company, and as a means to determine the performance monitoring techniques. Watts (2003), stated that one of the ways used to monitor and restrict the issue of contract management is the opportunistic behavior of corporate governance. Related with agency problems, corporate governance is a concept based on agency theory that expected to serve as means to give confidence to investors that they will receive a return of the funds that they have invested. In other words, corporate governance directed to reducing asymmetry information between principal and agent, which in turn could reduce earnings management measures (Ujiyanto and Bambang, 2007). 

Until now, there are many varying definitions of Good Corporate Governance (GCG). But generally have the same purpose and understanding. Forum for Corporate Governance in Indonesia or FCGI (2000) in the first publication is using the definition of the Cadbury Committee, that is: 

"seperangkat peraturan yang mengatur hubungan antara pemegang saham, pengurus (pengelola) perusahaan, pihak kreditur, pemerintah, karyawan serta para pemegang kepentingan intern dan ekstern lainnya yang berkaitan dengan hak-hak dan kewajiban mereka, atau dengan kata lain suatu sistem yang mengatur dan mengendalikan perusahaan."  

In addition, FCGI explained that the purpose of Corporate Governance is to create added value for all stakeholders.

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Healthy | Smart | Rich, at: 4/20/2012

Characteristics of Financial Statements

Characteristics of Financial Statements

Financial Statement is inseparable from Accounting. The financial statements are very important to describe the condition of the company. Characteristics of financial statements that must be :

The first is easy to understand (understandability).

This means that the essential qualities are accommodated in the financial statements must be understood by the user. For this purpose, the user is assumed to have adequate knowledge of economic activity and business, accounting, and a willingness to study with reasonable diligence.

Relevant (relevance).

Relevant information must be presented in these financial statements, in accordance with the actions to be performed by users. Or in other words, the ability of the relevant information is to influence the decisions of managers or other users of financial statements so that the existence of information can change or support their expectations about the results or consequences of the decision.

Reliability (reliability).

Reliability is the quality of the information in financial statements that caused users of accounting information is highly dependent on the accuracy of the information generated. Reliability of the information depends on the ability of an information fair to describe the situation / event in accordance with actual conditions.

The last is to be compared (comparability).

A financial statement can be compared to each other when the information is well comparable between periods and among companies. The financial statements have an important role for many parties, so that the timeliness of financial reporting is needed. (Baridwan) 

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Healthy | Smart | Rich, at: 3/13/2012

Financial Reporting Scandals

Financial Reporting Scandals

The financial statements are a source of information for stakeholders. Number of financial reporting scandals led to the stakeholders doubt the quality of information contained in financial statements. Their trust in the credibility and integrity of the business goes down because of the opportunistic behavior of managers. 

The practitioners regard this behavior as a fraud because it is consciously done by the company manager, so the stakeholders who want to know the economic condition of the company are deceived and obtain information that is not in accordance with the conditions of the company. This study aims to examine and analyze the influence of board size, proportion of independent commissioners, audit committees, auditor reputation, firm size, and growth of the company against the practice of earnings management. 

The population of this study used the entire banking sector companies listed on the Stock Exchange as many as 22 companies in 2006-2008. Sampling was conducted with a purposive sampling technique. With the sampling method, it is found samples as many as 13 companies that were used in this study. This study used secondary data of financial statements and financial data obtained from the Indonesian Capital Market Directory (ICMD) in 2006-2008 period. This study used the independent variables (board size, proportion of independent commissioners, audit committees, auditor reputation, firm size, and growth companies) and the dependent variable (earnings management). The method of analysis that was used to test the independent variables influence the dependent variable is the multiple regression. Effect of hypothesis tested F-test and t-test with a significance level of 5 percent.

The results show that (1) board size has negative effect and it is not significant against earnings management (2) the proportion of independent commissioners has negative effect and it is not significant against earnings management (3) audit committee has positive effect and it is significant against earnings management (4) auditor reputation has negative effect and it is not significant against earnings management (5) size of the company'shas positive effect and it is significant against earnings management (6) the company's growth has negative effect and it is not significant against earnings management. (by: I Gusti Ayu PS).

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Healthy | Smart | Rich, at: 3/09/2012

Accounting

Accounting

Understanding of the principles of bookkeeping and accounting is essential for anyone interested in accounting, even essential for anyone who wants to succeed in business.

Bookkeeping and accounting purposes is to provide information regarding the financial affairs of a company or business. This information is vital to know the business. owners themselves, managers, creditors, and government agencies.

A person who made ​​a living by recording the financial activities of a business or business employee, known as bookkeeping (bookkeeper), while the process of classifying and summarizing business transactions and interpreting the effects of the transactions carried out by an accountant.

So in brief we can say that 'Accounting (bookkeeping) related technical tasks such as recording transactions, and functions of an accountant is to interpret data generated by use of the bookkeeping process.

Accounting can be defined based on two important aspects, namely:
1) The emphasis on the aspects of function that is on the use of information accounting. Based on the aspects of the accounting function is defined as a discipline science that provides information necessary to conduct a efficient measures and evaluates the activities of the organization. Such information is essential for effective planning, monitoring and decision making by management and provides organizational accountability to investors, creditors, government and others.

2) The emphasis on this aspect of the activities of persons conducting the process accounting. In this aspect of people who carry out the accounting processes should:
• Identify the relevant data in decision making.
• Process or analyze the relevant data.
• Change the data into information that can be used to
decision-making. 

[jurnalakuntansikeuangan.com : VNBSX5FNK928].

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Healthy | Smart | Rich, at: 2/25/2012

Auditor's Role in The Realization of Good Governance

Auditor's Role in The Realization of Good Governance

The role of audit is vital in ensuring the proper financial and performance accountability report. Auditing is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria and communicating the results to interested users.

Audit is an examination that provides an objective and constructive assessment of the extent to which financial, human and physical resources are managed with due regard to economy, efficiency and effectiveness; and accountability relationships are reasonable served. Audit contributes in implementing good governance through government financial audit, performance audit, and special audit (Act # 15 year 2004). State losses could be found out by implementing an effective audit such as forensic audit, investigative audit, or other types of auditing. Audit opinion for government financial report will trigger government to work in better manner, more transparent, participative, and accountable.

The misuse of public office for private gain, the improper and unlawful behavior of public-service officials, both politicians and civil servants, whose positions create opportunities for the diversion of money and assets from government to themselves and their accomplices can be detected and found by audit.

 
This paper analyzes the auditor role in implementing good governance concerning financial accountability, transparency, and participation in order to achieve better public services. Discussion will be derived to find out the understanding of auditor role and good governance terminology fits for Indonesia environment. The purpose of
this paper is to achieve common knowledge about government auditing implemented in Indonesia. Besides, reader will find out explanation from both theoretical approach and pragmatical approach as well. (by: UNDP)

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Healthy | Smart | Rich, at: 2/23/2012

The Value of Information

The Value of Information

The value of information depends on its content, how to find it, and how to utilize it to support user’s activities. It means that the value of information can only be determined until the information has been received. First step for analyzing such cost are to identify and classify them properly. 

This classification should be based on the total costs of entire service activities such as direct costs, indirect costs, and some instances of additional costs. The important elements for determining costs that are burdened to users are salaries, raw materials or collection costs, and unexpected costs. The strategy for determining cost of information service in library depends on the aim for offering the services, price of service/product, and the fitness between the needs and the information provided as well as the demand for the services being offered. 

Although the cost and price of information services could be determined by five approaches –(those are optimal pricing, pricing according to value, pricing for full cost recovery, marginal cost pricing, and free distribution of services information)–provider must consider the content of information. It means that the calculation of information service's cost should be based not only by fixed and variable costs, but also by the information contents and depreciation of each collection. (Tri M)

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Healthy | Smart | Rich, at: 2/23/2012

Definition of Investment (Part 2)

Definition of Investment (Part 2)

Many experts who have formulated the definition of investment. The term investments related to various investment activities or saving a certain goal-oriented and how to achieve that goal (EP Pratomo: 2008, 7). According to AH Manurung (2006: xvii) defines investment as consumption temporarily postponed and will be consumed more in the future. That is, one party, both individuals and institutions will postpone their consumption with the purchase of investment instruments and then sell the investment instruments in the hope that the additional or greater value than ever. 

The definition of investment by Eduardus (2001, 3) is the commitment of a number of funds or other resources committed at this time, with the aim of obtaining a profit in the future. While the definition of investment according to Ahmad (1996, 3) is the placement of funds or money in the hope to obtain benefits or certain additional advantages over the money or funds. That is, some invested money or invested in certain areas that are considered investors can get results.

Investment (in wikipedia.org) based on economic theory, means the purchase (and thus production) of capital / capital goods which are not consumed but are used for the upcoming production (production goods). Examples among other investments to build toll roads, or build a factory, clearing new land, or someone who went to college education, and so forth.

For more details, investment is also a component of Gross Domestic Product by formula GDP = C + I + G + (XM). The investment function in that aspect is divided in non-residential investment (such as factories, machinery, etc.) and residential investment (new houses). Investment is a function of income and interest rates, given by the relation I = (Y, i). An increase in income will encourage greater investment, where higher interest rates will lower the interest for investment as it becomes more expensive than borrowing money. Even if a company chooses to use its own funds for investment, the interest rate indicates an opportunity cost of investing those funds rather than lend to earn interest.

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Healthy | Smart | Rich, at: 2/16/2012

Evaluation of Common Size Percentage

Evaluation of Common Size Percentage

Report a percentage per component shows the percentage of total assets invested in each type of asset. By studying the report in this percentage and compares with an average of the industry as a whole than similar companies, will be known whether we invest in something assets have exceeded the limits of generally accepted (over the investments) or it is still too small (under investment) brother "so for the next period we can take the necessary policies, so that matches our investment in assets is not too small or too big.

Statements in this way also shows the distribution rather than debt capital, so it shows the sources from where funds are invested in such assets. About this study will show which sources indicate to what extent the company uses its ability to obtain credit from outside sources, because of it also can be suspected / known how much the margin of safety which is owned by the creditors.

Percentage per component contained in the balance sheet would be a component percentage of total assets, so that comparisons horizontally from year to year will only show a trend rather than the relationship (trend of relationship) and does not indicate whether or not absolute changes in can be seen if returned to absolute data. So change from year to year does not indicate with certainty the changes in the absolute data.

Report a percentage per component in relation to the income statement, showing the number or percentage of net sales or net sales each individual cost and the percentage that are still available for income. Therefore, the common size percentage analysis is widely used by companies in relation to the income statement, because of the close relationship between sales, cost of goods and operating costs, are not widely used to balance. Next.

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Healthy | Smart | Rich, at: 5/29/2011

Theoretical Review of Exchange Rates

Theoretical Review of Exchange Rates

Activity in the foreign exchange market transactions include trading, hedging, and speculation arbitrage. Activities such transactions may affect whether or not the exchange rate movements is highly dependent on the strength of demand and supply in currency markets. However, speculative transactions in the Forex market is the transaction to benefit from expectations of future exchange rate movements that differ from the forward premium in the market is often a dominant cause exchange rate volatility.

There are several approaches developed so far in understanding exchange rate movements in short-term period. The first approach based on technical approach which refers to the graph of exchange rate movements and not based on fundamental macro-economic developments. This approach is basically based on the behavior of market participants (Allen and Taylor, 1990, Cheung and Chinn 1999). Another approach is, as was done by Evans and Lyons (2002), where it is stated exchange rate movements driven by the demand to make a purchase or a request to make sales as a result of market information. Information markets are not necessarily related to the information about macro economic fundamentals.

Chartist argued that exchange rate movements are influenced by the trend. Market participants who based on the chart will make a purchase currency when the exchange began to move up and sell currencies when the exchange rate of return has decreased. While the fundamentalists took the position to buy currency when they think the value of currency has been in the position of "under price" compared with the fundamental value, and make sales if the currency exchange rate has experienced overprice. Problems arise when the heterogeneous expectation of the fundamentalists, this will cause volatility in the short term and the strategy of the Chartist would cause long-term volatility (Helinä Laakkonen, 2004). Next.

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Healthy | Smart | Rich, at: 5/14/2011

Development and the Role of Central Bank

Development and the Role of Central Bank

Not all central banks that exist today than ever since has established as a Central Bank. In Britain and Sweden for example, the beginning of the Central Bank is a commercial bank. In Sweden banks that are now becoming the central bank was established in 1660, new in 1897 but the bank is acting as a central bank. Bank of England, namely the Central Bank in the UK was established in 1694 but its function as the new central bank began to run since 1884.

In the United States central bank called the Federal Reserve System, and the agency was founded in 1913. In the state developing countries, including in the state of Indonesia, the central bank was established since they achieved independence, namely in the years after World War II. Central Banks in Indonesia is Bank Indonesia the previous Bank is De Javasche Bank (the Dutch) are taken in 1953.

Central Bank is defined as a financial institution which is generally owned by the government entrusted with the responsibility to regulate and supervise the stability of financial institutions, and to ensure that the activities of financial institutions that will help create a high level of economic activity and stable.

If noted the role and activities undertaken by the Central Bank in various countries, it will be seen that in general the central bank assigned by the government to run the following five activities:

- Acting as a bank to the government

- Acting as a bank to commercial banks

- Overseeing the activities of commercial banks and other financial institutions

- Overseeing the balance of foreign trade activities

- Printing of coins and paper money needed to launch a production and trading activities. Next.

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Healthy | Smart | Rich, at: 5/14/2011

Analysis of Pricing

Analysis of Pricing

There are two reasons that cause the need to analyze demand and supply over the factors of production. The first is to explain the principle to use and allocate the factors of production efficiently. The second analysis of various factors to explain how income is determined.

In order to achieve maximum benefit then an entrepreneur will use a factor of production to the level where the maximum profit is achieved. The question is how such a situation be achieved?. A factor of production will create the maximum profit when the additional production costs incurred for the production of factors that together with the additional proceeds obtained from the additional production that was created by the input.

In the market for goods that are imperfect competition will lower prices at the level of production / sales of goods higher. These lower prices led to total sales revenue and sales results at every level of the use of marginal labor is lower than that contained in a perfectly competitive market.

The factors of production is influenced by the desire of entrepreneurs to produce goods that will be sold to the market to meet consumer needs. It has been shown that the activities of entrepreneurs produce goods intended to benefit the many factors of production which will be used to advantage depend employers may obtain. During the accretion use something of input will add to profits, more factors will be used. Therefore, employers demand upon something determined by the ability of the production factors of production factors to produce goods that can sell it with a profitable business, demand for production factors called divided demand. Next.

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Healthy | Smart | Rich, at: 5/14/2011

Background of Price Fixing

Background of Price Fixing

In producing activity, an employer must first consider the situation in the market, both in markets where sales / demand for products or markets referred to in the market output and factors of production or referred to input markets. The next step that should be considered joint employers is how the mode of production factors which should be used for such use to reach an optimum efficiency in production process. Production factors are important in production process. When a company gets the factors of production (input) of good quality then the result of production (output) that are created will also have a high value in the eyes of consumers.

 To get the factors of production, then the company must conduct the bid process as a prospective buyer with a seller that is provider of production factors. The detailed process of price formation mechanism in the market or in general can be observed that initially sellers offer goods or services with high prices, while buyers bid a lower price so unbearable when each would not have occurred sale and purchase transactions. Therefore, buyers are encouraged to raise its offer price in order to obtain the desired goods or services. While sellers are willing to lower prices for goods and services offered can be sold. Bargaining between buyers and sellers continue until this is obtained at prices agreed by both parties is when the price of goods or services demanded equal to the price of goods or services offered.
 

After the company doing the bargaining process and agree on the price of factors of production are desired, then the production process will be immediately performed. Of course, every company always apply the principle of doing a minimal sacrifice to get the results as much as possible or in other words, companies are trying to get the price of production factors is low but good quality. Price is an important factor in this process. So the pricing process in the input market must be understood and observed by every manufacturer.

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Healthy | Smart | Rich, at: 5/14/2011

Investment (Part 1)

Investment (Part 1)

According Kertonegoro (1995, 4) choice of investment of time can be divided into two, namely the short term or long term. Short-term investments are investments that the time for one year or less than one year, whereas long-term investments are investments with longer maturities or no maturity to know. 

Investment as well as to increase income each person also carry financial risk if the investment failed. Investment failure is caused by many things, among which is the factor of safety (whether due to natural disasters, political or caused by human factors), the rule of law, and others. 

 
In investing there are two kinds of assets, namely real assets and financial assets, which together can be considered as a means of investment. Real asset is an asset that has a form. Examples are land, houses, gold and other precious metals. Investing in real assets is common. For example, buying a house, and then rent them out, so get a monthly income. Financial asset is an asset that his form is not visible, but still has a high value. Generally there are financial assets in the banking world and also in the capital market, in Indonesia known as the Indonesia Stock Exchange. Some examples of financial assets are money market instruments, bonds, stocks and mutual funds. 

 
The investment also recognize the existence of ROI, ROI (return on investment) or ROR (rate of return) is the ratio of money gained or lost on an investment, relative to the amount of money invested. The amount of money gained or lost can be called interest or profit / loss. Investing money can be referred to as an asset, capital, principal, investment cost basis. ROI is usually expressed as a percentage and not in decimal value. 

 
ROI does not indicate how long an investment. However, ROI is often expressed in units of annual or annualized and often also expressed to a calendar or fiscal year. ROI is used to compare the return on investment between investments that are difficult compared using monetary values. Next.

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Healthy | Smart | Rich, at: 5/14/2011