THE EFFECT OF INCOME SMOOTHING ON LOAN LOSS PROVISIONS WITH AUDIT QUALITY AS A MODERATING VARIABLE: INDONESIA EVIDENCE

Abstract

The purpose of this study is to prove whether there is an effect of income smoothing on loan loss provisions in Islamic banks in Indonesia and aims to see whether audit quality in Islamic banks in Indonesia can strengthen or weaken the impact of income smoothing on LLP. The dependent variable LLP in this research divides into three, (i) LLP of Islamic Banks, (ii) LLP of sale and purchase agreements, and (iii) LLP of partnership contract agreements. The sample in this study was Islamic banks in Indonesia from 2013 to 2018. The methodology in this study was panel data regression analysis (panel regression analysis) and Moderate Regression Analysis (MRA). The results of the analysis are, first income smoothing has a significant positive relationship with the dependent variable LLP of Islamic banks. Second income smoothing has a significant relationship with the dependent variable LLP sale and purchase agreement, and LLP in the partnership contract agreement. Third Audit quality undermines the relationship weaken Islamic bank income smoothing and LLP, LLP sales and purchase agreements, and LLP partnership contract agreements.