Abstract

Purpose: This study aims to test whether local governments in Indonesia carry out creative accounting to obtain a national economic response loan in dealing with the COVID-19 pandemic with 0% interest. Theoretical framework: According to public choice theory, it can be predicted that local government will take advantage the National Economic Recovery (PEN) loan program with 0% interest from central government for their covid-19 prevention. Local government will fix the financial information which adjusted to the central government regulation in order to obtain the loan. Design/methodology/approach: The research population in the first year was all local governments in Indonesia. The sample obtained in this study was 51 local governments according to the criteria in the purposive method. The data analysis technique used in the study was the STATA analysis tool version 15. Findings: The result analysis regression has proven that the local government loan positively affects creative accounting. This study can also prove that geographic location and local government independence positively affects creative accounting. Research, Practical & Social implications: The low level of local government financial statement accessibility in Indonesia has resulted in a minimum amount of data being obtained. This can be a motivation for further research to examine the level of financial statements transparency in Indonesia. Originality/value: This study is the first to examine creative accounting by government accountants. Secondly, this study can improve scientific studies, especially financial accounting through empirical evidence about creative accounting carried out by Indonesian local governments in developing countries that have different characteristics from other countries in the world.