ANALYSIS AUDITED FINANCIAL STATEMENT OF DISTRESS COMPANIES TOWARDS ACCOUNTING DISTORTION LISTED ON INDONESIA STOCK EXCHANGE

Abstract

This research is conducted in order to analyze accounting distortion that occurs in financial distressed companies. The researcher would like to analyse what changes in financial statement that often caused the accounting distortion, how did accounting distortion occurred in financial statement of distressed companies, and how financial distress cause company distortion based on the new modified research model. Financial distress companies is measured by Altman Z Score Model, and financial distortion is measured by changes in receivable, inventory, net sales, and depreciation expense. The data used in this research is from companies listed on Indonesia Stock Exchange from the period 2011-2015. There are ten companies selected as financial distress based on Altman Z Score Model that are analyzed by comparing the first audited financial report with the revised financial report in order to find the indication of accounting distortion. As an output, a new modified model based on the ten financial distressed companies to represent data between financial distress and accounting distortion. The findings from this research shows that from ten companies of distress, there are eight companies indicated with accounting distortion. Compared to the healthy companies, the distortion occurred mainly because of the changes in accounting standards and changes in accounting estimation.