The Influence of Audit Opinion and Managerial Ownership on Income Smoothing in Banking Companies

This research was conducted on banking companies that are included in the top 30 in Indonesia. Data analysis method used in this study is to use a descriptive statistical analysis and logistic regression method with data processing using SPSS 21. The results of this study indicate that audit opinion has a negative but not significant effect on income smoothing. This indicates that with a low audit opinion does not indicate the company is making income smoothing. Managerial ownership shows the results have a significant negative effect on income smoothing, this indicates that the ownership of shares in the company can reduce the actions of managers to make income smoothing.

This research was conducted on banking companies that are included in the top 30 in Indonesia. Data analysis method used in this study is to use a descriptive statistical analysis and logistic regression method with data processing using SPSS 21. The results of this study indicate that audit opinion has a negative but not significant effect on income smoothing. This indicates that with a low audit opinion does not indicate the company is making income smoothing. Managerial ownership shows the results have a significant negative effect on income smoothing, this indicates that the ownership of shares in the company can reduce the actions of managers to make income smoothing.

INTRODUCTION
The financial report is a company facility to convey financial information that contains the accountability of management to fulfill the needs of external parties, namely information on company performance. According to the Statement of Financial Accounting Concept (SFAC) No. 1, earnings information is the main concern to assess performance or accountability of management.
Besides that, earnings information also helps the owner or other parties in estimating the company's earnings power in the future. The existence of a tendency to pay more attention to this profit is realized by management, especially managers whose performance is measured based on earnings information, thus encouraging the emergence of deviant behavior, one of which is earnings management (Putri et al, 2014).
The issue of information disclosure has received global attention from various parties due to its importance to investors in making investment decisions. The information asymmetr y that exists between the managers and shareholders has positioned the managers above the shareholders in terms of information advantage about the firm. Managers have exclusive access to operational information about firms' actions and future prospects, which causes them to have compelling reasons to ensure confidentiality of the information. Therefore, firms with a weak practice of information disclosure policy could cause managers to take advantage in pursuing their self-interests at the expense of their shareholders (Ghani at al, 2016). Strategy alignment between organization objectives and business unit and support functions become crucial for organization successful. Organization is able to execute its strategy well to compete with its rivals if organizational strategies are linked to business units and support functions within organization (Yuliansyah, 2015 as an independent auditor, Bank Indonesia as the payment system authority that handles credit cards, and the OJK as the institution responsible for banking supervision . Banking companies do more income smoothing than non-banking companies (Indriastuti, 2012).
The larger the size of the bank, the more likely to have more information than the smaller banks.
Information related to decision making will also increase. Bank size can be an indicator of the assessment of investors to assess the performance of the bank. Large banks generate relatively large profits. This is what can make large banks to make enough earnings management because one of the main reasons is to meet expectations from investors or shareholders (Agusti and Tyas, 2009).
Financial details reported by a company are important information for investors. Investors make decisions partly because the total earnings show the company's financial performance (Makhsun et al, 2018).
Earnings management arises as the impact of agency theory that occurs due to an inconsistency of interests between shareholders (principal) and company management (agent). Income smoothing is a management intervention in external financial reporting with the aim of benefiting itself (the manager). This conflict arises due to the emergence of information gaps provided, therefore it requires the existence of financial statement audits by competent and independent third parties (Lin and Mark, 2010). Company share ownership by management aims to align various interests between the principal and agent. By giving the manager the opportunity to be involved in the shareholding aims to align the interests of the manager with the shareholders, so that the greater the proportion of ownership by the managerial management will be more active for the benefit of the shareholders which includes themselves.

HYPOTHESIS Agency Theory
Agency theory is a theory that addresses differences in interests between agents and principals (Jensen & Meckling, 1976). Scott (2012) argues that agency theory is the most appropriate form of contract design to integrate principal and agent interests in the event of a conflict of interest. The company has many contracts, for example a work contract between the company and its managers and a loan contract between the company and its creditors.
The employment contract which mention here is a work contract between the owner of the capital and the manager of the company. There is interest between the agent and the principal want to maximize their utility with the information they have, the agent has more information than the principal (full of information), so that cause asymmetry of information. Information that is more owned by managers can encourage managers to take actions in accordance with their wishes and interests. As for capital owners, it will be difficult to effectively control the actions taken by managers because they only have little information available.
Therefore, sometimes there are certain policies carried out by company managers without the knowledge of the capital owners or investors.

Auditing
Auditing is a critical and systematic examination by an independent party of the financial statements prepared by management along with accounting records and supporting evidence in order to be able to provide an opinion on the fairness of the financial statements. Auditor quality is needed in determining good financial statements with high-quality auditors that are expected to increase investor confidence (Agoes, 2007).

Unqualified opinion with explanatory language
This opinion is given if the audit has been carried out or completed in accordance with auditing standards, the presentation of financial statements in accordance with generally accepted accounting principles, but there are certain circumstances or conditions that require an explanatory language.

Reasonable opinions with qualified opinions
According to IAI (2002), this type of opinion is

Managerial ownership
According to Sugiarto (2009) managerial ownership is ownership of shares by the management of the company. The greater the managerial ownership in the company, the managerial party will try to improve its performance for the benefit of shareholders, so as to avoid the existence of earnings management carried out by company managers.

Earnings management
Earnings management is one of the factors that can reduce the credibility of financial statements, and add bias in financial statements and disrupt financial statement users who believe the profit figures from the engineering as profit numbers without engineering (Wiryadi and Sebrina, 2013). Schipper (1989) defines earnings management as intentional management intervention in the process of determining earnings, usually to fulfill personal goals.
The pattern of earnings management according to Scott (2012) can be done by:

Taking a bath
This pattern occurs during reorganization, including the appointment of a new CEO, by reporting large losses. This action is expected to increase profits in the future because the burden of future periods is reduced.

Income minimization
Income minimization is done when the company experiences a high level of profitability, so that if the profit in the next period is expected to drop dramatically, it can be overcome by taking the previous profit.
This action was carried out with the aim of not getting political attention.

Income maximization
This pattern aims to report high net income for the purpose of greater bonuses, motivation to avoid violations of debt agreements, or to avoid a sharp drop in stock prices. Income maximization is applied when profit decreases.
This pattern is carried out by taking the previous period's profit deposits or withdrawing profits for the future period, for example by delaying the charging of costs.

Income smoothing
This pattern is carried out by the company by leveling the reported earnings, so as to reduce the fluctuations in profit that are too large, because investors generally prefer relatively stable profits.

Influence of Audit Opinion on Income Smoothing
De Angelo (1981) mentions that audit quality is the probability that an auditor finds and reports about a violation in the audit accounting system.  Table 1 as follows.

Index Eckel Calculation Results
The company is classified as income smoothing if: a. Index Eckel value ≥ 1 then the company is classified as not doing income smoothing b. and if the Index Eckel <1 then the company is classified as doing income smoothing.  , table 2 shows the number of companies that make income smoothing and do not make income smoothing.

Logistic Regression Test Results
Logistic regression was used in this study because the dependent variable in the study was a dummy variable. Logistic regression is used to test whether the probability of the occurrence of the dependent variable can be predicted by the independent variable (Ghazali, 2013).
Following are the results of the logistic regression analysis test:

Model Feasibility Test
The first step to knowing that a logistic regression model is an appropriate model will first look at the suitability or feasibility of the overall model. In this case the Hosmer and Lameshow Test is used. The following is a Hosmer and Lameshow Test Test

Test Fit Model (-2log likelihood)
Testing is done by comparing values -2log likelihood (block number = 0) with final -2log likelihood (block number = 1). If there is a decline, then the model shows a good regression model. Following are the Fit Model Test tables:

Regression Coefficient Testing
Regression coefficient testing is done to test how far all independent variables included in the model have an influence on the dependent variable.
Following are the results of data analysis with logistic regression: to be able to harmonize the potential differences in interests between outside shareholders and management (Jensen and Meckling, 1976). So the agency problem will be lost if a manager is also at the same time as an owner. The greater the proportion of management ownership in the company, the management tends to try harder for the benefit of shareholders who also include themselves.
The results of this research agree with the results of the research by Kouki et al (2011) which revealed that managerial ownership has a negative effect on earnings management and can improve the quality of the financial reporting process. Similar to the results of Oktovianti and Agustia (2012), which states that managerial ownership has a significant negative effect on earnings management. Pratiwi's research, et al (2015) also shows that there is a significant influence with a negative coefficient between managerial ownership on information asymmetry, this is in accordance with the principle of transparency in the implementation of corporate governance which reveals that the higher managerial ownership in a company, the information disclosure that occurs in the company is getting higher too, so it will reduce the gap of the information contained in it. In addition, the use of professional management will reduce the information gap in the company because professional management will maintain its credibility so that the company that becomes its responsibility will be more transparant.

MANAGERIAL IMPLICATIONS
This research provides empirical evidence that audit opinion does not have a significant effect on income smoothing, while managerial ownership has a significant effect on income smoothing. Subsequent research is expected to add other variables that are predicted to affect income smoothing and can also use a wider sample, not only banking companies but can use companies that have gone public in Indonesia..

CONCLUSION
Based on the results of the research as described, it can be concluded that: