THE EFFECT OF LEVERAGE, FIRM SIZE, INDEPENDENT COMMISSIONER AND AUDITOR REPUTATION ON EARNINGS MANAGEMENT: Empirical Study on Manufacturing Companies Listed in the Indonesian Stock Exchange 2010-2012

Earnings management is one of dysfunctional behavior done by certain party that is believed with a purpose of satisfying the interests of the owners. Earnings management has become a controversial issue. While it�s a legal action according to GAAP, earnings management is an unethical behavior based on the previous researches. It is unethical because the shareholders may use the information for decision making that mislead by earnings management Empirical studies have shown that earnings management is evidenced in many economic contexts. This indicates that certain economic events or variables can be utilized as a mechanism for managing earnings. This evidence provides opportunity for accounting researchers, in particular, and management researchers to examine the possibility of occurrence of earnings management in various economic contexts. It is important to understand the certain parts of financial statement that may help to detect the earnings management. Thus, this research is aim to find relationships between variables of leverage, firm size, independent commissioner and auditor reputation towards earnings management. To be more specified, this research focused on the manufacturing industry that listed on Indonesian Stock Exchange. The purpose of this research is to understand the effect of leverage, firm size, independent commissioner and auditor reputation on earnings management. In this study, leverage, firm size, independent commissioner and auditor reputation was proposed to have significant relation to earnings management. The result showed that firm size was positively related to the earnings management, while the rest of the variables did not provide any empirical support. Key words: Earnings Management, Leverage, Firm Size, Independent Commissioner, Auditor Reputatio