Prudence In Quality of Financial Statements

Abstract

Financial statements can be used as a basis for decision making by users of financial statements or stakeholders. To be useful, the financial statements apply the principle of prudence adopted in IFRS. The research objective is to obtain empirical evidence of the significant influence between Financial Distress on Value Relevance and Prevention as intervening. This study uses an explanatory approach - causality or causal relationship with modification of the path analysis carried out in companies included in Kompas100 Index stock category and listed on Indonesia Stock Exchange to see the impact of financial distress experienced by the company on prudential attitudes ( Prudence) and measure its impact on the qualitative characteristics of earnings-based earnings attributes. The results showed that Financial Distress influences Prudence, Prudence influences the quality of financial statements, Financial Distress influences the quality of financial statements and Financial Distress influences the quality of financial statements simultaneously. Research findings indicate that prudence is able to mediate financial distress on the quality of financial statements.