The Influence of Ceo Turnover and Committee Audit Characteristic Toward Audit Fees

Shabrina Herawati, Yustrida Bernawati

doi:10.24912/ja.v24i2.696

Abstract

This study aims to test empirically the effect of CEO turnover and the frequency of audit committee meetings on external audit fees. The population of this research is all manufacturing companies listed on the IDX in 2018-2019. By using the purposive sampling technique, obtained a sample of 103 companies in 2 years. This study uses secondary data in the form of annual reports where data is obtained from the IDX or the Company's website. Hypothesis testing uses quantitative methods with multiple regression analysis techniques. To test the impact to make it more credible, control variables are used, namely Return On Assets (ROA) and Total Assets. The results of hypothesis testing show that CEO turnover and audit committee meeting frequency do not affect audit fees. Meanwhile, ROA and total assets have a significant positive effect on external audit fees.

Highlights

Financial statements are important document which is containing company’s important information
This research is proven that Chief Executive Officer (CEO) turnover and audit committee meeting frequency does not influence the external audit fees
This situation represents that for manufacture company in Indonesia, CEO turnover related to the transfer of rights and obligation in which external auditor have to be careful with the possibility of profit management practices and audit procedures

Summary

Introduction

Financial statements are important document which is containing company’s important information. Engagement, the company has three risks that are (1) client’s business risk which related to profitability and client’s survival; 2) audit risk which means that there is possibility that the client misstated the financial statement and the auditor fails to recognize the misstatement; 3) auditor of business risk which is related to litigation potential cost and the potential of reputation effect is harmful (Huang et al, 2014). Jiwasraya’s case in which the management claimed that the company gained profit of 360 billion rupiahs, but the company lost 7 trillion rupiahs. This action resulted a penalty for Pricewaterhouse Coopers (PwC) because of their “reasonable with modification” opinion. Jiwasraya’s claim about their profit is false (Saputra, 2020)

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