The Effect of Financial Distress, Management Turnover, Audit Opinion and Reputation of Public Accounting Firm to Auditor Switching

Vera Oktari ,Arumega Zarefar

doi:10.7176/rjfa/10-22-11

Abstract

This research aimed to determine the effect of financial distress, management turnover, audit opinion, and reputation of public accounting firm to uditor switching in all companies registered in Indonesia Stock Exchange during the period of 2014 - 2017. Methodology Approach – This research uses Logistic Regression analysis. This research uses 260 companies with an observation period of 4 years as the samples and the test results show that financial distress has an effect on auditor switching with significant value of 0.049 <0.05, management turnover has an effect on auditor switching with significant value of 0.03 <0.05, audit opinion has an affect on auditor switching with significant value 0.021 <0.05 and the reputation of public accounting firm on auditor switching with significant value 0,034 <0,05. The results presented in this research have important implications on audit profession and regulators in Indonesia. Keywords : Financial Distress, Management Turnover, Audit Opinion And Reputation of Public Accounting Firm. DOI : 10.7176/RJFA/10-22-11 Publication date: November 30 th 2019

Highlights

Financial statements are accountability reports of a company or management to interested parties related to the condition of the company in certain periods i.e shareholders, government, creditors, and other related interested parties
It can be seen that the value Nagelkerke's R Square together the variables of financial distress, the change of management, audit opinion and reputation of the firm has been able to explain the diversity of the data in the variable switching auditors of 9.5%, while the remaining 90.5% is explained by other variables outside our model
Testing the hypothesis in this study was to test the effect of independent variables, namely the audit opinion, financial distress and Change of Management as the independent variable on the dependent variable, namely the auditor switching, using a significance test of regression coefficients and the results that are formed can be seen from the table below

Summary

Introduction

Financial statements are accountability reports of a company or management to interested parties related to the condition of the company in certain periods i.e shareholders, government, creditors, and other related interested parties. Financial statements describe the information about the financial condition of a company. Financial statements have the information needed by both internal and external parties as the basis for decision making. Reliable information from the management regarding the fund accountability invested and other information used as the basis of decision making is very needed by the external parties like shareholders, creditors, potential investors, tax office, and labor union. Financial statements must be examined by an independent auditor to provide audit opinion and is in accordance with Generally Accepted Accounting Principles. Independent auditor has a function to conduct an objective examination and provide an opinion for the reasonableness of the financial statements presented the by the company's management. Every go public company must publish their financial statements in accordance with the actual condition in order to produce reliable financial statements

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Conclusion