Do Tax Planning, Leverage, and ESG Influence Earnings Management? The Role of Audit Quality

Abstract

Earnings management remains a major concern in financial reporting because it may reduce the credibility of accounting information and weaken stakeholders’ confidence. This study aims to examine the influence of tax planning, leverage, and Environmental, Social, and Governance (ESG) performance on earnings management, while investigating the moderating role of audit quality. A quantitative explanatory research design is employed using secondary data obtained from annual reports, audited financial statements, and sustainability reports of non-financial companies listed on the Indonesia Stock Exchange during the 2021–2025 period. The data are analyzed using panel data regression with moderation analysis to evaluate both the direct effects of the independent variables and the interaction effects of audit quality. The findings indicate that tax planning and leverage have a positive and significant effect on earnings management, whereas ESG performance has a negative and significant effect. Furthermore, audit quality significantly moderates the relationships between tax planning, leverage, ESG, and earnings management by reducing managerial discretion and improving the credibility of financial reporting. These findings suggest that high-quality auditing serves as an effective corporate governance mechanism capable of mitigating opportunistic financial reporting practices. The study contributes to the accounting and sustainability literature by integrating financial, non-financial, and governance factors into a comprehensive empirical framework. The findings also provide practical implications for regulators, investors, auditors, and corporate managers in promoting transparent financial reporting and strengthening corporate governance.