Balancing Audit Quality to Auditees Cash Reserves: A Phenomenon in Indonesia

Abstract

High audit quality is essential for capital providers seeking accurate financial reports for investments. External auditors play a crucial role in safeguarding capital providers’ interests by detecting fraud and ensuring financial statement reliability. High-quality auditors scrutinize reports thoroughly, reducing legal disputes and financial constraints for entities. This research was conducted with a focus on several sectors on a company including, Finance, Manufacture and Mining Sector listed on IDX 2017-2021, with a total of 250 sample of a company. Research shows that firms with high audit quality rely less on cash reserves, enhancing cash liquidity and attracting investors. This research confirms that high audit quality significantly increases auditees’ cash reserves, emphasizing the need for auditors to protect shareholder interests and avoid legal and reputational risks beyond verifying financial statements.