| Summary: | This study was aimed to test the influence of insentif (bonus) contract framing
litigation level and tax expense level to accounting policies made by CFO when preparing
financial statement. Beside of that, this research also tested the interaction influence
between insntif (bonus) contract and litigation level, insentif (bonus) contract and tax
expense, and also litigation level and tax expense to accounting policies made by CFP
when preparing financial statement.
This research used laboratorium experiment method in collected the data. This
experiments used 2x2x2 factorial design. Experiments subjects were business students
(MM and Maksi) who were being CFO, that met certain criteria. They came from Gadjah
Mada University � Yogyakarta, STIE YKPN - Yogyakarta, and Diponegoro University -
Semarang. Meanwhile, analysis tool used was Anova.
Research results showed that there was an influence of insentif contract framing,
litigation level, and tax expense level to conservative accounting policies made by CFO,
when preparing financial statement. Beside that, mean value of positive framing was
significantly bigger than mean value of negative framing. It was also happen with mean
value of high litigation level and big tax expense, respectively, showed significant values
which were bigger than mean value of low litigation level and small tax expense level.
Meanwhile, the interaction results between variables of framing and litigation, framing
and tax expense, and also litigation and tax expense, showed unsignificant results. This
was prooved that positive insentif contract framing, high litigation level, and big tax
expense, put CFO in positive (gain) conditions so that CFO would be risk-averse and
reflected in his/her decisions which tended to more conservative.This results supported
prospect theory explanations. Nevertheless, the researcher�s efforts to proove interactions
between independent variables in this research were not supported. This meant that
prospect theory explanations could not be interacted because it tended to debilitate one
explanations to the others explanation.
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