ABSTRACT
A fraudulent financial statement is the type of financial fraud that has the most adverse impact. The purpose of this study was to find empirical evidence of the influence of auditor opinion and auditor switching on fraudulent financial statements, and empirically prove that a good corporate governance mechanism moderate the influence of auditor switching in relation to fraudulent financial statements. The population for this research is public companies in the manufacturing sector in the period 2013 to 2015. A purposive judgment sampling method resulted in a sample of 135 companies. The data used are secondary data from companies’ annual financial statements. This study uses PLS (Partial Least Squares) in the context of variance-based Structural Equation Modeling (SEM) to simultaneously test the measurement model and the structural model. WarpPLS 4.0 is used as a data analysis tool. The first test results prove that auditor opinion has a positive but insignificant effect on fraudulent financial statements; however, auditor switching has a positive and significant effect. Second, good corporate governance mechanism proxy by managerial ownership and institutional ownership. The results show that managerial ownership proved able to moderate or weaken the influence of auditors switching on fraudulent financial statements, but institutional ownership has an moderate to insignificant effect on the influence of auditors switching.
