The effect of public accounting firm size, financial distress, institutional ownership, and management change on the auditor switching in manufacturing companies listed in Indonesia Stock Exchange

Dewi Sri Kistini,Joicenda Nahumury

doi:10.14414/tiar.v4i02.334

Abstract

The purpose of this study is to examine the effect of public accounting firm size, financial distress, institutional ownership, and management change on auditor switching in the manufacturing companies listed in Indonesia Stock Exchange (IDX) from 2007 to 2012. The total samples in this research are 294 companies selected by using purposive sampling method based on specific criteria. Data are collected using secondary data from manufacturing companies listed in Indonesia Stock Exchange. The hypothesis is analyzed with Logistic Regression using SPSS’s program 20.0 version for windows. The result of this research indicates that public accounting firm size has significanteffect on auditor switching, meanwhile financial distress, institutional ownership, and management change do not have significant effect on auditor switching.

Highlights

The financial statement presented by a company provides a wide range of information that is used as a tool for decision making either for internal party or external party of the company
Based on the results of hypothesis testing in the logistic regression through the Wald test, it can be concluded that of the four independent variables, public accounting firm size are the size, financial distress, institutional ownership, and management change, only variable of public accounting firm which has significant effect on auditor switching
The Effect of Public Accounting Firm Size on Auditor Switching The test result of logistic regression shows that the variable of public accounting firm size has significant

Summary

Introduction

The financial statement presented by a company provides a wide range of information that is used as a tool for decision making either for internal party or external party of the company. Financial statement should contain qualified information that can be used as a basis to make decision appropriately. To ensure that the company’s financial statement contains qualified information, the financial statement itself must be audited by an auditor. The auditor is required to be independent and objective in providing audit services (Ekka Aprillia 2013). Mulyadi (2002: 26) defined independent as "the mental attitude that is free from influence, not controlled by other parties, and not depend on others", while objective is "fair attitude, impartial, intellectually honest, not prejudiced or biased, and free from conflict of interest or under the influence of the other parties.”

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Conclusion