The Effect of Capital Expenditure, Audit Opinion, and Regional Independent on Potential Level of Regional Losses in Indonesia

Oleh :
Muhammad Hisyam Asadul Haq - F0321159 - Fak. Ekonomi dan Bisnis

This research aims to examine the effect of capital expenditure, audit opinion, and regional independence on the potential level of regional losses (TPKD) as an indicator of corruption in Indonesian regency/city governments. This study is motivated by the persistently high number of corruption cases in the regions following the implementation of Regional Autonomy, despite the existence of external oversight mechanisms such as audits by the Supreme Audit Agency (BPK). This research employs a quantitative approach using secondary data obtained from the Summary of Examination Results (IHPS) of the BPK, Regional Government Financial Statements (LKPD), and Statistics Indonesia (BPS). The population consists of regency/city governments in Indonesia during the 2021–2023 period, with a final sample of 1,527 observations selected through purposive sampling. Data were analyzed using panel data regression with the Random Effect Model (REM), selected based on the Chow, Hausman, and Lagrange Multiplier tests. The results show that capital expenditure has a positive and significant effect on the potential level of regional losses, audit opinion has a negative and significant effect, while regional independence has no significant effect. These findings indicate that capital expenditure allocation creates opportunities for irregularities, while a good audit opinion effectively serves as a signal that suppresses corrupt practices. Meanwhile, fiscal independence alone is not sufficient to reduce the potential level of regional losses without being supported by an adequate internal control system.