The Role of Auditors in Moderating the Effect of Tri Hita Karana-Based Sustainability Report Disclosure on Earnings Quality
Abstract
This study aims to examine the effect of Tri Hita Karana (THK) -based Sustainability Report disclosure on Earnings Quality, and to analyze the role of External Auditors in moderating this relationship. Using a descriptive quantitative approach at PT Island Concepts Indonesia Tbk listed on the Indonesia Stock Exchange for the 2022–2024 period, this study measures the THK variable through content analysis and proxied earnings quality with Discretionary Accruals using the Modified Jones Model . The results of the study found a paradoxical phenomenon where high compliance with cultural values disclosure (Index 1.00) does not guarantee high financial statement integrity. Earnings quality was proven to decline in 2024, marked by an increase in discretionary accruals, indicating the existence of earnings management practices with an Income Minimization pattern due to financial distress . This study also concluded that cultural value disclosure tends to be symbolic ( symbolic adoption ) as a legitimacy strategy, and the role of external auditors has not been fully effective in limiting management's opportunistic behavior during the crisis period.
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