THE EFFECT ACCOUNTING CONSERVATISM USING LO_EKO MODEL

The purpose research is to examine other variables that also affect the relationship between conservatism and earnings quality. Data population are companies listed in Indonesia Stock Exchange during the period 2014-2017. The sample selection is based on purposive sampling method with the purpose of obtaining a representative sample. The results of this study indicate that the Instrumental Variables Conservatism has a significant positive effect on the Earning Quality. This means that management positively signals the application of accounting conservatism within the company and has an impact on improving the quality of earnings. The next investor is expected to provide more valuations by providing a high premium for the company's stock price.


INTRODUCTION
The practice of each company's conservatism is usually different, due to the various choices of accounting methods. Conservatism is an accounting principle that tends to generate profit and asset values. Conservatism slows revenue recognition and accelerates cost recognition. All substantive financial, operational or business variations can alter the views of rating agencies on the creditworthiness of a firm. This may lead to agencies to change the rating to assess the new level of credit risk. These variations may also alter the investors' views on the valuation and risks of the firm (Abad & Robles, 2014); (Aboulamer & Kryzanowski, 2016); (Adrian, Crump, & Moench, 2017). The results show the surrounding the application of the principle of conservatism. Conservatism critics argue that this principle causes the financial statements to be biased so it can not be used as a tool to evaluate corporate risk. Conservatism is the principle that most influence accounting valuation (Chakrabarty & Moulton, 2014) (Adewuyi, 2016) Conservatism is defined as a concept that delays the recognition of future cash inflows and as a conservative accounting which states accountants report the lowest accounting information of several possible values for assets and revenues, and the highest for liability and burden (Kothari, 2014). Conservatism as a preference for accounting methods that yields the lowest value for assets and income on the one hand, and produces the highest value for debt and fees, in other words, the conservatism produces the lowest equity book value. Studying the links between fundamental signals and future earnings changes allows us to test directly the validity of the economic intuition that underlies the original construction of the signals.
Investors and creditors have different interests in the company. Investors are trying to take advantage by taking excessive dividends from creditor funds. This condition is made possible with companies with a very large managerial ownership structure. The decision to pay an excessive dividend increases. Meanwhile creditors want the security of funds for future profits. To avoid the transfer of profits made by investors through excessive dividend withdrawal then the creditor wants a conservative financial reporting. Emerging markets are accumulating capital at a faster rate than developed Ajar Vol. 2 No. 1 (Februari) 2019, 57 -69 markets, and their market capitalization and share in world capitalization is growing, but they lag far behind developed markets, such as the US and European markets, in terms of growth, number of stocks listed, foreign investment, liquidity, and risk. In a global portfolio. advocate, weight needs to be assigned to these markets to generate higher returns because of growth potential.
The extant literature suggests that these markets are informationally inefficient, and how that liberalization and trading infrastructure is necessary but not sufficient to improve the quality of information in EMs. As the EMs integrate with developed markets, the higher positive correlation exposes these markets to global shocks and volatility (Kumari, Mahakud, & Hiremath, 2017). A basic issue for understanding capital markets is whether limited attention affects th e decisions of investors and equilibrium securities prices. A growing body of evidence confirms that attentional constraints affect investor trading (Hirshleifer, Hou, & Teoh, 2014). Conservatism supporters argue that conservatism produces higher-quality profits because this principle prevents corporations from exaggerating earnings and helps users of financial statements by presenting non-overstate earnings and assets. They prove that earnings and assets calculated by conservative accounting can improve the quality of earnings so that it can be used to assess the company. The presentation of changes in assets and liabilities of the company's long term issuer is seen by investors and capital market analysts as the company-specific risks that have an impact on asset pricing. This condition is caused due to the operational needs of the company with regard to the use of fixed assets in the machinery and equipment manufacturing companies considered important by investors (

LITERATURE REVIEW
The contractual relationships proxyed with the ownership structure, debt structure, and firm size affect the accounting conservatism. In addition, these studies provide evidence of accounting conservatism practices in companies in Indonesia Accounting conservatism to deal with conflicts of interest around the dividend policy Researchers suspect that there are other variables that contribute to the relationship between conservatism and earnings quality.good Corporate Governance is a set of mechanisms that can protect the minority shareholders from expropriation by managers and controlling shareholders (insider) With an emphasis on legal mechanisms. The legal approach of corporate governance means that the key mechanism of corporate governance is the protection of external investors, both shareholders and creditors, through a legal system that can be interpreted by law and its implementation.
Of all the information about the company available throughout the year, some or more are derived from the income number of the year. The reported earnings quality can be affected by managerial share ownership. Managerial share ownership is one of the elements of Good Corporate Governance. We also find that the large-trader response to accruals information is restricted to cases where the previously announced earnings news for the quarter is non-negative.
In other words, large traders seem to ignore the information in accruals following negative earnings surprises (Battalio, Lerman, Livnat, & Mendenhall, 2014); (Mendenhall, 2014); (Merton, 2010)(K. H. Kim & Kim, 2016) The increase in operating current accrual changes being considered a specific risk reduction company. This is because the Indonesian capital market investors Ajar Vol.

RESEARCH METHODS
The proxy that allegedly can catch construct conservatism based definitions accounting conservatism as a tendency to debase the value of assets, raising debt, recognizing revenue more slowly, and recognizes the costs more quickly.
Alternative measures used accounting conservatism is an instrumental variable accounting conservatism (VICV) developed by Lo (Lo, 2005). with the following formula:

(UL-UD jt) / A it-1 = β1 it (1 / A jt-1 ) + β2 it (Δ Pjln jt / A jt-1 ) + ε
The study used the debt other than trade debts abnormal (UL-UDA) divided by Regression analysis serves to measure the effect of variable VIC against the quality of earnings. Therefore, before described a discussion of regression analysis, it first has to be presented the results of the regression data processed by using SPSS that can be seen through  Classic assumption test was not performed because this study uses panel data types that allow the identification of specific parameters without the need to make assumptions tight or do not require the fulfillment of all the assumptions of classical linear regression on Ordinary Least Squar ( Adewuyi, 2016); (Bollerslev, Xu, & Zhou, 2017); (Nath & Brooks, 2017) (Borgers, Derwall, Coedijk, & Horst, 2017 The results of this regression showed that based on the study sample, the variable existence of audit committee is moderating variables that can not be make accounting conservatism relationship with earnings quality. However, the marked positive coefficient indicates that the variable number of commissioners positive effect on accounting conservatism relationships with earnings quality.The structure of management in Indonesia as their cross-directorship (the connection between members of the audit commitee company with another company audit committee members) may be able to weaken the function of service and control committee aud. If investor know that members of the audit committee of a company into another company official investors will give low ratings on the company. This is reasonable considering the conditions in Indonesia can be considered as collusion and nepotism which tends to be negative. However, this still requires further research. Another possibility requirements independent audit committee members and the educational background of finance and accounting as required by the regulations are not met.Thus H 2d hypothesis which states that the existence of an audit committee positive effect on accounting conservatism relationships with earnings quality, can not be supported.

CONCLUSION
From the results of research conducted at the manufacturing companies listed in Indonesia Stock Exchange that meet criteria for the selection of the sample, then a number of conclusions as follows: The results of this study indicate that conservatism Instrumental Variables The results of this study also proves that the variable amount Comisioner independent board as one of the mechanisms of corporate governance is moderating variables that can make relationship between accounting conservatism with the quality of earnings and positive influence.
Instead proportion of managerial ownership, institutional ownership proportion and the existence of an audit committee is not a moderating variable that can make relationships accounting conservatism and earnings quality. The results of this study do not support the research find that audit committees positively influence the quality of earnings