Page 164 - SUSTAINABILITY ISSUES & COVID-19

Michael J and William M (1976) say there are at least three types of agency fees, including:
a. Costs allocated to monitor managerial activities, for example audit fees.
b. Costs are used to limit or control management activities from unwanted actions and abuse of authority. Examples
are the costs of making standard operating procedures, creating company information systems, and appointing
outside parties to become the board of directors or occupy the management hierarchy.
c. Opportunity costs that occur because of restrictions on shareholder votes.

Agency cost expenditures must be managed so that they are not too excessive so that the costs incurred for supervision
do not exceed the benefits obtained or in other words the output received is not proportional to the costs incurred.
Jensen and Meckling (1976) classify agency costs into 3 types, namely:
a. Monitoring costs. Costs incurred to control and supervise management activities.
b. Bonding cost. Costs incurred by management to comply with and establish systems and procedures to provide
assurance that management is acting in the interests of the principal.
c. Residual loss. Costs incurred due to a decrease in principal’s welfare as a result of differences in decisions between
management and principals. Therefore, the principal needs to supervise the company’s activities which are carried
out by management. In this case, the independent auditor is an independent party appointed to carry out an
examination of the financial statements prepared by management.

In reducing information asymmetry, one of the duties of public accountants is to conduct audits that aim to provide an
opinion regarding the fairness of the presentation of financial statements made by the company. Public accountants
in providing opinions must be independent and not in favor of anyone’s interests and providing audit opinion is
carried out with due regard to audit quality. To achieve this, public accountants have professional standards that
regulate the quality of services provided by public accountants in Indonesia. One of these professional standards is the
Quality Control System which provides guidance to public accounting firms in implementing service quality control
carried out by their offices by complying with various standards that have been issued by the Professional Standards
Board for Public Accountants of the Indonesian Institute of Certified Public Accountants (DSPAP IAPI) and the Rules.
Ethics Compartment of Public Accountants published by IAPI. By applying applicable professional standards, Public
Accountants will provide quality services so that they can help companies provide information to companies as an
added value for company evaluation and improvement.

2.2 Good Corporate Governance
The OECD (Organization of Economic Cooperation and Development) defines Good Corporate Governance or what is
called good corporate governance as a set of regulations that regulate the relationship between company management,
shareholders, boards, and other parties who have interests in the company. Good corporate governance is governance
that provides supervisory facilities in achieving the goals of company management, boards and shareholders.
Supervision is aimed at providing adequate assurance that the company has managed company resources efficiently
and minimizing deviant behavior in earnings management.

In its application, to implement GCG in a company, principles are needed so that GCG can be implemented properly.
According to the KNKG (National Committee for Governance Policy) (Zarkasyi, 2008), the principles of GCG are:
a. Transparency
To maintain objectivity in conducting business, companies must provide material and relevant information in
a way that is easily accessible and understood by stakeholders. Companies must take the initiative to disclose
not only the problems implied by laws and regulations, but also matters that are important for decision
making by shareholders, creditors and other stakeholders. Here there are 2 indicators used in assessing
company transparency, namely information and policies within the company.
b. Accountability
The company must be accountable for its performance in a transparent and fair manner. For this reason, the
company must be managed properly, measured and in accordance with the interests of the company by
taking into account the interests of shareholders and other stakeholders. Accountability is a requirement
needed to achieve sustainable performance. In assessing the accountability of a company, it can be seen
from 2 indicators, namely work basis and audit.

International Conference on Sustainability 163
(5 Sustainability Practitioner Conference)
Th