The Influence of Financial Reporting Quality on Profit Quality in Companies in Medan City

Abstract

This study aims to analyze the effect of financial reporting quality on earnings quality in companies in Medan City. Financial reporting quality is an important aspect in presenting relevant, reliable, and transparent information to stakeholders, particularly in assessing company performance through earnings information. However, in practice, reported earnings do not always reflect actual economic conditions due to the flexibility of accounting policies and the potential for earnings management practices. This study uses a quantitative approach with an associative research type. The data used are secondary data obtained from the financial statements of companies in Medan City. Data analysis techniques were carried out using regression analysis to test the effect of financial reporting quality as an independent variable on earnings quality as a dependent variable. The results show that financial reporting quality has a positive and significant effect on earnings quality. This indicates that the better the quality of financial reporting prepared transparently and in accordance with accounting standards, the higher the resulting earnings quality. Quality earnings tend to be more stable, sustainable, and supported by adequate cash flow, thus gaining more trust from financial statement users. This study confirms that improving the quality of financial reporting is crucial in producing credible earnings information and supporting appropriate economic decision-making.