Varying the Quality of Business Communication Caused by Compliance of Different Accounting Rules

Abstract

This study examines the extent of Indonesian companies’ compliance with the Indonesian accountingregulations (IARC) of inventory, fixed assets, and depreciation by analyzing 160 Indonesianlisted companies’ 2006 annual reports. This study also looks at potential factors thatexplain the level of this compliance. Analysis reveals a high level of 71.63% inventory compliance,51.13% fixed assets compliance, and 99.69% depreciation compliance with accountingrules. T-test and regression analysis show that firm size is a significant predictor of accountingcompliance. Importantly, ownership and governance structures do not influence the level ofcompliance. Although Indonesian firms complied with more than 50% of the key accountingrule provisions, regulatory intervention appears needed to improve compliance. Such regulationmight include sanctions as promulgated by multilateral financial organizations (World Bank2005). Copyright © www.iiste.org