Varying the Quality of Business Communica tion Caused by Compliance of Different   Accounting Rules

Agus Setyadi, Rusmin Rusmin, Greg Tower, Alistair M. Brown

Abstract

This study examines the extent of Indonesian companies‟ compliance with the Indonesian ac
counting regulations (IARC) of inventory, fixed assets, and depreciation by analyzing 160 In
donesian listed companies‟ 2006 annual reports. This study also looks at potential factors that
explain the level of this compliance. Analysis reveals a high level of 71.63% inventory compli
ance, 51.13% fixed assets compliance, and 99.69% depreciation compliance with accounting
rules. T-test and regression analysis show that firm size is a significant predictor of accounting
compliance. Importantly, ownership and governance structures do not influence the level of
compliance. Although Indonesian firms complied with more than 50% of the key accounting
rule provisions, regulatory intervention appears needed to improve compliance. Such regulation
might include sanctions as promulgated by multilateral financial organizations (World Bank
2005).