Risk Management in Reducing Audit Findings: Evidence from Indonesia Local Government
https://doi.org/10.35877/454RI.qems4076
Keywords:
Audit Findings, Local Government, Non-Compliance with Satutory Regulations, Risk Management
Viewed = 0 time(s)
Viewed = 0 time(s)
Abstract
Risk management has become an integral element of entity governance, particularly in the public sector, which continues to face intense scrutiny in an effort to minimize audit findings. This study aims to analyze the impact of risk management implementation on audit findings in Indonesian local governments. Through a quantitative approach and linear regression analysis in STATA-17 programming, data was obtained from local governments in 2021, with a total of 542 observations processed. The results revealed that the implementation of risk management contributed to reducing audit findings, especially those related to non-compliance with satutory regulations, including findings that resulted in local financial losses, potential financial losses, revenue shortfalls, and administrative irregularities. This study provides new insights into the important role of risk management in strengthening governance, improving accountability, and optimizing financial management in local governments. Therefore, this study underscores the importance of integrating risk management into every financial management process within local governments to minimize regulatory non-compliance and to achieve effective, efficient, and accountable financial management.
References
Abdullah, M. I., Furqan, A. C., Yamin, N. Y., & Oktora, F. E. (2020). Incentive function of audit opinion for the increase of regional operational expenditure and own-source revenues through sensitivity analysis in Indonesia. Research in World Economy, 11(1), 20–27. https://doi.org/10.5430/rwe.v11n1p20
Ahmad, S., Akbar, S., Halari, A., & Shah, S. Z. (2021). Organizational non-compliance with principles-based governance provisions and corporate risk-taking. International Review of Financial Analysis, 78, 101884. https://doi.org/https://doi.org/10.1016/j.irfa.2021.101884
Ahmeti, R., & Vladi, D. B. (2017). Risk Management in Public Sector: A Literature Review. European Journal of Multidisciplinary Studies, 5(1), 323. https://doi.org/10.26417/ejms.v5i1.p323-329
Alford, J. (2002). Why do public-sector clients coproduce? Toward a contingency theory. Administration & Society, 34(1), 32–56. https://doi.org/https://doi.org/10.1177/0095399702034001004
Boufounou, P., Eriotis, N., Kounadeas, T., Argyropoulos, P., & Poulopoulos, J. (2024). Enhancing Internal Control Mechanisms in Local Government Organizations: A Crucial Step towards Mitigating Corruption and Ensuring Economic Development. Economies, 12(4). https://doi.org/10.3390/economies12040078
CHRISTENSEN, M., & Yoshimi, H. (2003). Local authority, local government, performance management model, public performance. Government Auditing Review, 10, 71–83.
Drennan, L. T., McConnell, A., Stark, A., & Drennan, L. T. (2014). Risk and crisis management in the public sector. Routledge. https://doi.org/https://doi.org/10.4324/9781315816456
Eilifsen, A., Hamilton, E. L., & Messier Jr, W. F. (2021). The importance of quantifying uncertainty: Examining the effects of quantitative sensitivity analysis and audit materiality disclosures on investors’ judgments and decisions. Accounting, Organizations and Society, 90, 101169. https://doi.org/https://doi.org/10.1016/j.aos.2020.101169
Furqan, A. C., Wardhani, R., Martani, D., & Setyaningrum, D. (2021). Financial reporting, public services and local executives’ re-electability in Indonesia. Cogent Business & Management, 8(1), 1939229. https://doi.org/https://doi.org/10.1108/IJPSM-06-2019-0173
Haryansyah, S. E., Islamy, S. N., Anas, Z., Nazhatut, U., & Sampang, T. A. (2024). PORTRAIT OF RISK MANAGEMENT AS AN EFFORT TO PREVENT. 1(3), 155–163.
Imai, K., & Bougher, L. D. (2021). Quantitative social science: An introduction in Stata. Princeton University Press.
Levytska, S., Pershko, L., Akimova, L., Akimov, O., Havrilenko, K., & Kucherovskii, O. (2022). A Risk-Oriented Approach in the System of Internal Auditing of the Subjects of Financial Monitoring. International Journal of Applied Economics, Finance and Accounting, 14(2), 194–206. https://doi.org/10.33094/ijaefa.v14i2.715
Lois, P., Drogalas, G., Nerantzidis, M., Georgiou, I., & Gkampeta, E. (2021). Risk-based internal audit: factors related to its implementation. Corporate Governance: The International Journal of Business in Society, 21(4), 645–662. https://doi.org/https://doi.org/10.1108/CG-08-2020-0316
McGrandle, J. (2017). Understanding diversity management in the public sector: A case for contingency theory. International Journal of Public Administration, 40(6), 526–537. https://doi.org/https://doi.org/10.1080/01900692.2015.1136942
Nurvania, R., Hidayatulloh, F. S., & Koeswanda, H. (2024). BASTBANPEM Application Stakeholders ’ Perceptions on Accountability and Transparency of the Ministry of Agriculture ’ s Financial Reports. 5(5).
O’Regan, B., King, R., & Smith, D. (2022). Combining accountability forms: transparency and “intelligent” accountability in a public service organization. Accounting, Auditing & Accountability Journal, 35(5), 1287–1315. https://doi.org/https://doi.org/10.1108/AAAJ-03-2020-4473
Puteri Amalia, I. (2022). Risk Based Audit and Fraud Risk Management. International Colloquium on Forensic Accounting and Governance (ICFAG), 2(1), 1–8.
Rahayu, N. K., Harymawan, I., Ekasari, W. F., & Nowland, J. (2021). Risk management committee, independent commissioner, and audit fee: An update. Cogent Economics & Finance, 9(1), 1892926. https://doi.org/https://doi.org/10.1080/23322039.2021.1892926
Rosliana, R., Elliany, E., & Handayani, W. (2022). Implementation of Fraud Risk Management to Minimize Fraud Risk in Wanda Putra Kencana Surabaya. International Journal of Social Science, Education, Communication and Economics (SINOMICS JOURNAL), 1(5), 667–680. https://doi.org/10.54443/sj.v1i5.76
Sargiacomo, M., Everett, J., Ianni, L., & D’Andreamatteo, A. (2024). Auditing for fraud and corruption: A public-interest-based definition and analysis. British Accounting Review, 56(2), 101355. https://doi.org/10.1016/j.bar.2024.101355
Sari, T. R., & Rohman, A. (2020). Analysis of Factors Affecting Accountability in Village Fund Management in Central Lombok District. E-Jurnal Akuntansi, 30(7), 1886–1899. https://ojs.unud.ac.id/index.php/akuntansi/article/download/59300/35566/
Smith, D., & Toft, B. (1998). Risk and crisis management in the public sector: Editorial: Issues in public sector risk management. Taylor & Francis.
Sonjaya, Y., Iswati, S., & Muslim, M. (2025). The Role of Internal Control Systems in Enhancing Local Financial Report Accountability. Jurnal Akuntansi, 29(21), 336–358.
Spinelli, D. (2022). Fitting spatial autoregressive logit and probit models using Stata: The spatbinary command. The Stata Journal, 22(2), 293–318. https://doi.org/https://doi.org/10.1177/1536867X221106373
Tarjo, T., Vidyantha, H. V., Anggono, A., Yuliana, R., & Musyarofah, S. (2022). The effect of enterprise risk management on prevention and detection fraud in Indonesia’s local government. Cogent Economics & Finance, 10(1), 2101222. https://doi.org/https://doi.org/10.1080/23322039.2022.2101222
Wibowo, T., & Tobing, A. N. L. (2022a). Implementation of Fraud Prevention Strategy in Government Institution X. Article, 1, 492–516.
Wibowo, T., & Tobing, A. N. L. (2022b). The Implementation of Fraud Risk Assessment and Anti-Fraud Strategy in Government Institution XYZ. Asia Pacific Fraud Journal, 6(2), 285. https://doi.org/10.21532/apfjournal.v6i2.232
Ahmad, S., Akbar, S., Halari, A., & Shah, S. Z. (2021). Organizational non-compliance with principles-based governance provisions and corporate risk-taking. International Review of Financial Analysis, 78, 101884. https://doi.org/https://doi.org/10.1016/j.irfa.2021.101884
Ahmeti, R., & Vladi, D. B. (2017). Risk Management in Public Sector: A Literature Review. European Journal of Multidisciplinary Studies, 5(1), 323. https://doi.org/10.26417/ejms.v5i1.p323-329
Alford, J. (2002). Why do public-sector clients coproduce? Toward a contingency theory. Administration & Society, 34(1), 32–56. https://doi.org/https://doi.org/10.1177/0095399702034001004
Boufounou, P., Eriotis, N., Kounadeas, T., Argyropoulos, P., & Poulopoulos, J. (2024). Enhancing Internal Control Mechanisms in Local Government Organizations: A Crucial Step towards Mitigating Corruption and Ensuring Economic Development. Economies, 12(4). https://doi.org/10.3390/economies12040078
CHRISTENSEN, M., & Yoshimi, H. (2003). Local authority, local government, performance management model, public performance. Government Auditing Review, 10, 71–83.
Drennan, L. T., McConnell, A., Stark, A., & Drennan, L. T. (2014). Risk and crisis management in the public sector. Routledge. https://doi.org/https://doi.org/10.4324/9781315816456
Eilifsen, A., Hamilton, E. L., & Messier Jr, W. F. (2021). The importance of quantifying uncertainty: Examining the effects of quantitative sensitivity analysis and audit materiality disclosures on investors’ judgments and decisions. Accounting, Organizations and Society, 90, 101169. https://doi.org/https://doi.org/10.1016/j.aos.2020.101169
Furqan, A. C., Wardhani, R., Martani, D., & Setyaningrum, D. (2021). Financial reporting, public services and local executives’ re-electability in Indonesia. Cogent Business & Management, 8(1), 1939229. https://doi.org/https://doi.org/10.1108/IJPSM-06-2019-0173
Haryansyah, S. E., Islamy, S. N., Anas, Z., Nazhatut, U., & Sampang, T. A. (2024). PORTRAIT OF RISK MANAGEMENT AS AN EFFORT TO PREVENT. 1(3), 155–163.
Imai, K., & Bougher, L. D. (2021). Quantitative social science: An introduction in Stata. Princeton University Press.
Levytska, S., Pershko, L., Akimova, L., Akimov, O., Havrilenko, K., & Kucherovskii, O. (2022). A Risk-Oriented Approach in the System of Internal Auditing of the Subjects of Financial Monitoring. International Journal of Applied Economics, Finance and Accounting, 14(2), 194–206. https://doi.org/10.33094/ijaefa.v14i2.715
Lois, P., Drogalas, G., Nerantzidis, M., Georgiou, I., & Gkampeta, E. (2021). Risk-based internal audit: factors related to its implementation. Corporate Governance: The International Journal of Business in Society, 21(4), 645–662. https://doi.org/https://doi.org/10.1108/CG-08-2020-0316
McGrandle, J. (2017). Understanding diversity management in the public sector: A case for contingency theory. International Journal of Public Administration, 40(6), 526–537. https://doi.org/https://doi.org/10.1080/01900692.2015.1136942
Nurvania, R., Hidayatulloh, F. S., & Koeswanda, H. (2024). BASTBANPEM Application Stakeholders ’ Perceptions on Accountability and Transparency of the Ministry of Agriculture ’ s Financial Reports. 5(5).
O’Regan, B., King, R., & Smith, D. (2022). Combining accountability forms: transparency and “intelligent” accountability in a public service organization. Accounting, Auditing & Accountability Journal, 35(5), 1287–1315. https://doi.org/https://doi.org/10.1108/AAAJ-03-2020-4473
Puteri Amalia, I. (2022). Risk Based Audit and Fraud Risk Management. International Colloquium on Forensic Accounting and Governance (ICFAG), 2(1), 1–8.
Rahayu, N. K., Harymawan, I., Ekasari, W. F., & Nowland, J. (2021). Risk management committee, independent commissioner, and audit fee: An update. Cogent Economics & Finance, 9(1), 1892926. https://doi.org/https://doi.org/10.1080/23322039.2021.1892926
Rosliana, R., Elliany, E., & Handayani, W. (2022). Implementation of Fraud Risk Management to Minimize Fraud Risk in Wanda Putra Kencana Surabaya. International Journal of Social Science, Education, Communication and Economics (SINOMICS JOURNAL), 1(5), 667–680. https://doi.org/10.54443/sj.v1i5.76
Sargiacomo, M., Everett, J., Ianni, L., & D’Andreamatteo, A. (2024). Auditing for fraud and corruption: A public-interest-based definition and analysis. British Accounting Review, 56(2), 101355. https://doi.org/10.1016/j.bar.2024.101355
Sari, T. R., & Rohman, A. (2020). Analysis of Factors Affecting Accountability in Village Fund Management in Central Lombok District. E-Jurnal Akuntansi, 30(7), 1886–1899. https://ojs.unud.ac.id/index.php/akuntansi/article/download/59300/35566/
Smith, D., & Toft, B. (1998). Risk and crisis management in the public sector: Editorial: Issues in public sector risk management. Taylor & Francis.
Sonjaya, Y., Iswati, S., & Muslim, M. (2025). The Role of Internal Control Systems in Enhancing Local Financial Report Accountability. Jurnal Akuntansi, 29(21), 336–358.
Spinelli, D. (2022). Fitting spatial autoregressive logit and probit models using Stata: The spatbinary command. The Stata Journal, 22(2), 293–318. https://doi.org/https://doi.org/10.1177/1536867X221106373
Tarjo, T., Vidyantha, H. V., Anggono, A., Yuliana, R., & Musyarofah, S. (2022). The effect of enterprise risk management on prevention and detection fraud in Indonesia’s local government. Cogent Economics & Finance, 10(1), 2101222. https://doi.org/https://doi.org/10.1080/23322039.2022.2101222
Wibowo, T., & Tobing, A. N. L. (2022a). Implementation of Fraud Prevention Strategy in Government Institution X. Article, 1, 492–516.
Wibowo, T., & Tobing, A. N. L. (2022b). The Implementation of Fraud Risk Assessment and Anti-Fraud Strategy in Government Institution XYZ. Asia Pacific Fraud Journal, 6(2), 285. https://doi.org/10.21532/apfjournal.v6i2.232
Published
2025-08-31
Issue
Section
Articles
How to Cite
Weyha, T. K. H., Furqan, A. C., Betty, & Anshori, M. (2025). Risk Management in Reducing Audit Findings: Evidence from Indonesia Local Government. Quantitative Economics and Management Studies, 6(4), 638-646. https://doi.org/10.35877/454RI.qems4076
Copyright (c) 2025 Tifani Keren Hapuk Weyha, Andi Chairil Furqan, Betty, Ma'amun Anshori
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
