Auditor Rotation Research Articles

DETERMINAN KUALITAS AUDIT BERDASARKAN STANDAR PERIKATAN DAN UKURAN KAP

Financial statements are an important instrument for every company which is not only a means of making decisions by the company's internals alone, but also to assess the condition or condition of the company by external parties as well. In recent years, manipulation of audited financial statements caused by auditor violations often occurs, so that public doubts arise over the quality of audits produced by auditors. This study aims to determine the effect of audit fees, audit tenure, audit rotation and KAP size on audit quality. Sampling was carried out using the purposive sampling method and resulted in a selected sample of 59 manufacturing companies multiplied by a five-year observation period, so that the total number of observation data was 295. The research data used in this study were secondary data taken from the annual report. manufacturing company registered on ISSI from 2016-2020. This study implies a descriptive research design using a quantitative approach. Data analysis in this study uses logistic regression analysis which is processed using STATA version 16 test tool. The results of this study indicate that audit fees have a positive effect on audit quality, audit tenure and KAP size have no effect on audit quality, while audit rotation has a negative effect on audit quality.

PENGARUH ROTASI AUDIT, FEE AUDIT, JUMLAH PARTNER, DAN REPUTASI KAP TERHADAP KUALITAS AUDIT DENGAN KOMITE AUDIT SEBAGAI VARIABE MODERASI

Penelitian ini dilaksanakan dengan tujuan mengidentifikasi seberapa besar pengaruh faktor-faktor dari rotasi audit, fee audit, jumlah partner, dan reputasi KAP terhadap kualitas audit dengan komite audit sebagai pemoderasi pada perusahaan perbankan di Bursa Efek pada periode 2018-2020. Peneliti menggunakan data sekunder yang diambil dari laporan keuangan perusahaan, dimana data perusahaan yang digunakan adalah data perusahaan perbankan sebanyak 46 perusahaan yang dipilih dengan menggunakan metode purpose sampling. Selain itu, peneliti menggunakan metode discretionary accrual untuk pengumpulan data kualitas audit. Uji Normalitas, Autokorelasi, Heteroskedastisitas, Multikolinearitas, uji Koefisien Determinasi, Statistik T, serta Statistik F merupakan uji yang digunakan guna menganalisis data. Hasil akhir penelitian ini menemukan bahwa terdapat korelasi positif yang signifikan antara rotasi audit dan fee audit terhadap kualitas audit yang dihasilkan. Disamping itu, penelitian ini menemukan bahwa komite audit yang berperan sebagai pemoderasi menunjukan hasil yang memperkuat pengaruh bagi faktor-faktor seperti rotasi audit, fee audit, jumlah partner, reputasi KAP terhadap kualitas audit yang dihasilkan.

Effectiveness of Internal Audit Implementation at BPJS of Employment

Abstract This study aims to analyze the effectiveness of implementation of internal audit in BPJS Ketenagakerjaan. This study involved 8 informants consisting of the Assistant Head of the Internal Audit Department, Internal Auditor, and the Branch Head. Measurement of the effectiveness of internal audit in this study uses the IPPF Practice Guide: Measuring Internal Audit Effectiveness and Efficiency from the Institute of Internal Auditors which consists of basic measures, services to stakeholders, technical development, innovation, and human resource development. The results showed that in a basic measure, clients (auditees) felt satisfy with the services provided by SPI. Internal auditors also feel satisfied in terms of the field of work and salary or facilities provided by management. The findings obtained by internal auditors at this time are more on administrative errors and do not lead to fraud. The recommendations by the internal auditor are always followed up by the auditee and this is also the support of management. Repeated findings are still at a reasonable level and the numbers are not many. The existence of SPI greatly helps management in achieving organizational goals. SPI allocates a budget for internal auditor technical development, but this is done in turn because of budget constraints. Internal auditors are also involved in professional organizations, but their nature is only passive. All internal auditors already have certification and auditor rotation is carried out in accordance with the needs and management policies. Keywords: internal audit, effectiveness of internal audit, internal audit department

Does audit firm tenure enhance firm value? Closing the expectation gap through corporate social responsibility

PurposeThis study aims to examine the moderating effect of audit firm tenure on the association between corporate social responsibility (CSR) and firm value. Prior studies provide mixed results on this association, which may be due to differing theoretical expectations related to CSR and firm value. It is also possible that external stakeholders are unable to differentiate between positive and negative CSR investments, as CSR reports are generally not assured by independent third parties. Thus, the authors propose that audit firm tenure may be used by external stakeholders to evaluate CSR performance.Design/methodology/approachThe authors use an ordinary least squares regression to examine the moderating effect of audit firm tenure on the relation between CSR and firm value after controlling for other determinants of firm value and various internal and external governance mechanisms documented in the literature. The sample consists of 15,707 firm-year observations from US firms during the sample period of 2000 to 2012. The authors measure CSR quality using rating scores from MSCI ESG STATS (formerly the KLD database), audit firm tenure as the number of years the incumbent auditor has served the client and firm value using Tobin’s Q.FindingsThe results indicate that CSR is positively associated with firm value when audit firm tenure is long but not when tenure is short. The results are robust to alternative measures of firm value, CSR performance scores, and individual CSR dimensions. The evidence supports the argument against mandatory audit firm rotation in the USA.Research limitations/implicationsFuture studies could examine a similar issue in alternative settings and/or look at cross-sectional variations among firms on the association between CSR and firm value by other auditor traits such as auditor industry specialization and big-name reputation. Additionally, as auditor alone is unable to ensure the quality of management disclosures and their accountability, future studies could examine the moderating effect of internal and other external governance mechanisms on the association between CSR and firm value, exploring when the signaling effect of auditor tenure on CSR reporting quality and its effect on firm value is most salient.Practical implicationsThe findings are important to regulators and investors. The authors provide evidence that longer audit tenure serves as a signaling device for external investors with regard to the quality of a firm’s CSR performance. Hence, the study facilitates regulators’ cost-benefit analysis related to mandating audit firm rotation. The evidence suggests that mandating a term limit on auditor tenure may have the unintended consequence of eliminating a signaling effect of auditor tenure on the quality of CSR disclosures under information asymmetry. This supports the Public Company Oversight Board’s decision to forgo the requirement of mandatory audit firm rotation in the USA.Originality/valuePrior literature presents mixed findings on the association between CSR performance and firm value based on a variety of underlying theories (economic, stakeholder and contingency theory). Literature on mandatory auditor rotation has concentrated on the auditor tenure effect on perceived and actual audit quality as reflected in earnings quality. Relying on agency theory, this study posits that auditor tenure serves as a signal for the quality of CSR activities in the absence of CSR assurance reporting as CSR quality can be difficult to evaluate. The authors provide evidence that audit tenure moderates the association between CSR activities and firm value and longer audit tenure makes it more likely that the CSR activities are associated with increased firm value.

Disclosure of key audit matters (KAMs) in financial reporting: evidence from an emerging economy

PurposeThe new audit regulation for disclosure of key audit matters (KAMs) in financial reporting has been introduced in both developed and developing countries. This study investigates the influence of three distinctive sets of variables, namely industry features, firm characteristics and auditor attributes, on the extent, pattern and level of disclosure of KAMs by companies listed in Bangladesh, an emerging economy.Design/methodology/approachThe study uses qualitative and quantitative research approaches to investigate the pattern of disclosure of KAMs and their determinants. With a sample of 447 firm-year observations from companies listed on the Dhaka Stock Exchange over 2018–2020, the study reveals industry-level, firm-level and auditor-specific characteristics that affect KAMs' communication in the new audit reporting model.FindingsThe findings suggest that significant differences exist between firms in the number and types of KAMs reported and the extent of their disclosure. The study findings also observed variations both within and across different industry sectors. Highly regulated firms disclose a greater number of KAMs, while environmentally sensitive firms are found to provide a greater detail of the issues presented as KAMs. Further, both firm size and age positively impact the number of KAMs disclosed and the extent of the disclosure provided. Big-4-affiliated auditors do not issue a significantly higher number of KAMs but deliver extensive details to their KAMs description, compared to non-Big-4 auditors. In addition, while auditors, in general, tend to issue boilerplate KAMs, Big-4 associates are found to disclose more new KAMs. However, audit fees and auditor rotation do not influence KAMs disclosure.Research limitations/implicationsThis study is based on two years of publicly available data. However, future studies could consider in-depth interviews to explore the motivation behind KAMs' disclosure in Bangladesh and other developing countries with similar cultural and contextual values.Practical implicationsThese findings have substantial policy considerations for improving firms' audit quality and, thus, their financial reporting quality, with implications for national and international standard-setters, regulators and other stakeholders.Originality/valueThis study is one of the earliest endeavours to investigate KAMs in a context of an emerging country, such as Bangladesh, which adopted KAMs' disclosure in 2018.

Pengaruh Audit Fee, Tekanan Anggaran Waktu dan Rotasi Audit terhadap Kualitas Audit dengan Pengalaman Auditor sebagai Variabel Moderating

This study aims to analyze the effect of audit fees, time budget pressure and auditor rotation on audit quality with auditor experience as a moderating variable. In this study, auditors who worked at 7 Public Accounting Firms (KAP) in Padang City were used as respondents. The number of samples used in this study were 60 respondents. The data processing method uses multiple linear regression analysis. Statistical test results show that audit fees have no effect on audit quality and the time budget pressure variable has a negative effect on audit quality and auditor rotation has a positive effect on audit quality. Auditor experience as a moderating variable can moderate the relationship between audit rotation and audit quality, while auditor experience does not moderate audit fees and time budget pressure on audit quality.

Audit rotation, information asymmetry and the role of political connections: international evidence

PurposeAudit rotation (AR) is a key policy initiative implemented in global jurisdictions to deal with concerns about audit quality. Auditing financial reports involves communicating attested value-relevant company information to investors, and hence audit quality plays a role in the quality of financial reporting information. This paper aims to investigate whether AR affects the degree of information asymmetry (IS) between investors. It further aims to examine whether voluntary AR results in less asymmetric information compared to mandatory AR. Additionally, it examines whether political connections moderate the association between AR and IS.Design/methodology/approachThe authors use data from publicly traded banks across the Gulf Cooperation Council (GCC) for the period 2010–2018. The authors include several variables to control for corporate governance and other firm-specific characteristics by using country-year fixed-effects regression model.FindingsThe authors find higher IS for banks that periodically rotate auditor, while banks voluntarily choose to rotate auditors obtain high-quality audits, which results in higher trading volume and lower stock return volatility, hence lower IS. The results suggest that when banks voluntarily choose to rotate auditors, investors perceive these banks as more committed to obtaining high-quality audits relative to mandatory AR. Providing higher quality audits enhances the credibility of reported information and thus reduce the level of IS. Moreover, IS following AR is higher for politically connected banks than for similar but politically unconnected banks. Finally, investors perceive voluntary AR as a disciplining tool, which mitigates IS. This mitigating role is not affected by bank political connectedness.Research limitations/implicationsThis study has limitations as the definition of AR could be interpreted as binary or too narrow, and hence it may not be appropriate to generalize findings to different contexts. Nonetheless, this study casts light on a new perspective to reconcile the existing mixed evidence on the influence of AR on IS and the moderating role of political connections. A further limitation is that because of data unavailability, the authors were unable to use other proxies (e.g. bid-ask spreads and analyst forecast dispersion) of IS.Practical implicationsThe present findings provide insight to regulators, policymakers and standard setters on the potential adverse effect of political connections on the role of AR in mitigating IS. The results underscore the importance of voluntary AR, and suggest that regulators, policymakers and standard setters encourage firms to rotate their auditors periodically.Originality/valueThis study provides evidence in a setting that is unique at the economic, social and regulatory levels. Prior literature is lacking and has been centered on developed countries or focusing on single-country specifications. The data set of this study is unique and allows us to examine the interplay between political influence that arises through ownership and management roles of influential members of state.

Implications of Auditors` Rotation in Financial Audit Reporting

The purpose of this paper is to study the implications of auditors' rotation on financial audit reporting in the case of companies listed on the Bucharest Stock Exchange in the period 2011-2021. It was analyzed the relationship between the rotation of audit firms and the audit opinion, the impact on the audit cost, as well as the effects on the key audit matters. The regulatory framework has been modified at the same time for the key audit matters and the rotation of auditors, and it is therefore interesting to examine how they associate with each other. Using the descriptive statistical analysis method mainly oriented towards graphical analysis, it is illustrated that the rotation of audit firms leads to improved reporting in audit by reducing the number of modified opinions, respectively increasing the number of KAM communicated in the audit report. Finally, the change of auditor does not lead to substantial changes in the audit fees, which is why such a decision is not determined by considerations of reduction of audit costs, but rather by other reasons.

Effect of auditor rotation violation on audit opinions and audit fees: Evidence from China

In the setting of the Chinese auditing regime, we identify a sample of “rotation-violation” auditors who continue to serve clients after the mandated rotation period has expired, and find that the occurrence of auditor rotation violation is driven more by supply-side factors than by demand-side factors or market institutional factors. By controlling the endogeneity problem using a treatment effects model, we find that rotation-violation auditors significantly issue more favorable opinions and are paid higher fees. These results support our proposed auditor–client collusion argument that rotation-violation auditors issue favorable opinions to clients in return for fee premiums. Further, we find that the collusion effects of auditor rotation violation are decreased by the existence of government control, audit firm location, and the regional market development in the Chinese environment. Our findings draw regulators’ attention to the real effects and enforcement of audit partner rotation.

PENGARUH FEE AUDIT, AUDIT TENURE, ROTASI AUDIT DAN UKURAN PERUSAHAAN TERHADAP KUALITAS AUDIT

This research is based on both recent and current phenomena regarding audit quality, one of the phenomena that has become of interest in conducting this research such as the previous cases, namely the Enron case and the latest one as experienced by PT Garuda Indonesia. affect audit quality. . The purpose of this study is to examine the effect of audit fees, audit tenure, audit rotation and company size on audit quality and to develop a theory of planned behavior that contributes to the independent variables. The population in this study are all Manufacturing Companies in the Multi-Industrial Sector and Companies in the Property, Housing & Construction Sector listed on the Indonesia Stock Exchange for the 2018-2020 period. The sampling technique used is purposive sampling method and obtained as many as 129 data samples. The analytical method used is Logistic Regression (Logistics Regression). The results showed that audit fees had a positive and significant effect on audit quality, while audit tenure, audit rotation and firm size had a positive but not significant effect on audit quality

PENGARUH UKURAN PERUSAHAAN, FEE AUDIT, AUDIT TENURE, DAN ROTASI AUDIT TERHADAP KUALITAS AUDIT

This research was conducted to test the effect of variables of Company Size, Fee Audit, Audit Tenure, and Rotation audit on Audit Quality. The sample in this study amounted to 59 primary consumer sector companies listed on the Indonesia Stock Exchange for the period 2018-2020 which were selected based on purposive sampling methods and also referred to the selected criteria. The sample data was obtained by 59 companies with a total sample of 177. The quality of audits in the study was measured using a proxy of the size of a public accounting firm. The analysis technique used is logistic regression with a significance rate of 5%. The results showed that (1) The Size of the Company had a significant positive effect on audit quality (2) Fee Audit had a significant effect on audit quality (3) audit tenure had no significant effect Positive to Audit Quality (4) Audit Rotation has no effect on Audit Quality.

Audit Tenure, Audit Firm Reputation and Audit Quality Study on Indonesian Manufacture Companies

The debate on audit quality still continues due to different results and arguments on audit tenure, audit firm reputation and audit quality. This study provides empirical evidence on the differentiation of audit quality by considering the audit tenure and audit firm reputation. Using the data from IDX of manufacturing companies in 2019 and 2020, the researcher examines the difference in audit quality, measured by discretionary accruals, in terms of audit tenure and audit firm reputation. This study also examines 247 companies that are analyzed using Mann-Whitney test. Findings from this study reveal that there is no significant difference between the audit quality of companies that have repeated and non-repeated audits. However, this study indicates that there is a significant difference in the audit quality of a company that is audited by the big 4 and non-big 4 audit firms. Based on the result, it can be suggested that auditor rotation is not necessary to enhance the audit quality since independent auditors tend to sustain their reputation and maintain their service qualifications.

Audit Tenure, Audit Fee, and Audit Quality : Evidence from India

This paper examined the relationship between the tenure of the auditor and the audit quality of Indian companies, particularly in the wake of two significant regulations in the financial reporting, the implementation of Ind AS (the IFRS compliant accounting standards) and mandatory auditor rotation. Using Discretionary Accruals as a proxy for audit quality, the study took the data of all the companies listed on the NSE for 11 financial years, from 2009 – 2019 (totaling 8,171 firm-year observations). It deployed panel data regression with a random-effects model. The results showed that audit quality improved up to specific auditors’ tenure, particularly with the IFRS compliance and Big 4 auditors. The higher audit fee is positively significantly associated with lower earnings quality. The study suggested that mandatory auditor rotation might provide the full benefit only along with other regulations on IFRS, auditor reputation, and audit fee. The study provided an impetus to the regulators, audit fraternity, and companies to improve the relevance of financial statements. This is one of the first longitudinal studies examining the interaction effects of different audit regulations. Robustness checks with other proxies of audit quality provided the same results.

The Effect of Audit Tenure and Audit Rotation on Audit Quality in Companies Listed on the Stock Exchange

This study aims to determine how audit tenure and audit rotation affect audit quality in companies listed on the Indonesia Stock Exchange in 2019-2020. The population used in this study are manufacturing companies listed on the Indonesia Stock Exchange from 2019 to 2020. Sampling in this study used a purposive sampling method. The data used in this study is secondary data in the form of the Annual Financial Statements of companies listed on the Indonesia Stock Exchange in 2019-2020. The data collection technique used in this research is documentation, namely collecting, recording, and reviewing secondary data in the form of financial reports.

Impact of COVID-19 pandemic on auditors’ responsibility: evidence from European listed companies on key audit matters

PurposeThis research seeks to assess the impact of the COVID-19 pandemic on the quality of financial reporting and the auditor's responsibility. This paper aims to investigate how the auditors identified the impact of COVID-19 on the companies' annual financial statements and considered this impact as a key audit matters (KAM) in the reports issued and the factors that influenced their reporting.Design/methodology/approachThe empirical research consists of a qualitative analysis of KAMs and a quantitative one based on a panel data econometric model using a random effects maximum likelihood regression. The sample includes companies listed on the primary market on European stock exchanges in 2019–2020.FindingsThe results suggest a direct positive correlation between numbers of KAMs and the auditor's size, frequency of the event and going concern uncertainty. Two of the variables were not validated: auditor rotation and audit fees.Research limitations/implicationsThe limitation of research can be the sample structure, and the model we proposed does not take into account all possible influencing factors.Practical implicationsThis study will help researchers, policymakers and business owners have a deeper understanding of auditors' responsibility in their work. As practical implications of the COVID-19 impact following the implementation of telework, audit firms have begun to invest in digital programs to assist them in their teamwork and communication with clients. One impact on regulators has been to relax reporting requirements by extending deadlines.Originality/valueThis research contributes to the academic literature by providing a synthesis and econometric model of the effects identified by auditors, following the COVID-19 pandemic, expressed by KAMs in their reports.

Pengaruh Audit Tenure, Rotasi Audit, dan Spesialisasi Auditor Terhadap Kualitas Audit Pada BUMN Go-Public

<p><em>This study was conducted to examine the effect of audit tenure, audit rotation, and auditor specialization on audit quality. Where the study of audit quality is useful for users of financial statements and auditors in particular, as well as to add empirical evidence related to several factors that affect audit quality. The measurement of audit quality used in this study uses the discretionary accrual model of Kasznik (1999). This research is different from previous research, where this research was conducted in a Go-Public BUMN company listed on the Indonesia Stock Exchange. Samples were taken from the period 2016-2020 with</em><em> a </em><em>purposive sampling method. The research method used is a quantitative method, using secondary data from Go Public BUMN Companies listed on the Indonesia Stock Exchange. The results of the regression analysis show that audit tenure and audit rotation have no effect on audit quality. Meanwhile, auditor specialization has a positive effect on audit quality.</em></p>

Pengaruh Financial Distress, Opini Audit, Dan Ukuran KAP Terhadap Auditor Switching

The independence of an auditor is one of the main things for auditors, in order to maintain the level of auditor independence, the government issues regulations related to auditor rotation. This study plans to examine the impact of financial distress, audit opinion, and KAP size on auditor switching at consumer goods industry companies listed on the Indonesia Stock Exchange (IDX) for the 2016 – 2020 period. 
 The independent variables used are financial distress, audit opinion, and KAP size. and the dependent variable, namely auditor switching. The population in this study are consumer goods industrial companies as many as 37 companies. The examination technique used is logistic regression analysis using SPSS version 25 software. The results of this study are that financial difficulties do not have a significant impact on auditor turnover, while audit opinion and KAP size have a significant positive impact on auditor changes.

Pengaruh Tekanan Klien Dan Rotasi Audit Terhadap Independensi Auditor: Pendekatan Eksperimen

The auditor is an external party who will check and ensure that the client's financial statements are free from material misstatement so that the quality of the audit provided must be good. Therefore it is important for an auditor to have an independent attitude. Independence is a basic attitude that must be possessed by an auditor because the auditor is required to be impartial to one party. But in reality, to maintain independence is not easy. One of the factors that affect the independence of an auditor is client pressure. In previous studies, it was found that client pressure was able to affect auditor independence because the pressure was related to audit fees. With the pressure there is a possibility of decreasing the level of auditor independence. In order to maintain independence, an effort is needed, one of which is auditor rotation. Auditor rotation is auditor rotation that must be carried out by the company, with the aim of producing good audit quality and maintaining auditor independence. Auditor rotation is also carried out to prevent a close relationship between the auditor and his client. Based on these circumstances, this study was conducted to examine the effect of audit rotation and client pressure on independence. Data collection was carried out through the 2 X 2 experimental method between subjects. The participants in this research experiment were students, lecturers/teachers, auditors and other occupations. The experiment was carried out using the help of information technology. The experimental task given is an adjustment audit. The results showed that client pressure had an effect on auditor independence and auditor rotation was able to increase auditor independence. However, the results of this study have not been able to prove interaction hypothesis between client pressure and auditor rotation on auditor independence.

Auditor rotation, key audit matter disclosures, and financial reporting quality

Auditor rotation is believed to affect financial reporting quality partly because of the fresh views brought by new auditors. However, fresh views are generally unobservable and are often presumed. This study examines fresh views as evidenced by changes in key audit matters (KAMs) following auditor rotation. Using data from Taiwan, we find that different KAM disclosures are more likely to be observed when there is a change in audit partner(s) than when there is none. The identification of different KAMs provides evidence of the fresh perspective of the new auditors. We also examine the association between financial reporting quality and auditor rotation based on whether there is a change in KAM disclosures. We find that auditor rotation is not significantly associated with accruals quality when there is no change in KAMs after the rotation. Auditor rotation tends to affect accruals quality only when different KAMs are provided by the succeeding audit partners. This finding suggests that auditor rotation influences financial reporting quality under circumstances when auditors change their assessments of significant risk, as this can affect the audit plan and process, and accordingly affect the audit results.

The Effect Of Audit Rotation, Audit Tenure And Auditor Reputation On Audit Quality With Profitability As Moderating Variable

This study aims to determine the effect of Audit Tenure, Audit Committee and Auditor Reputation on Audit Quality with Profitability as a Moderation variable. The sample used is a manufacturing company listed on the Indonesia Stock Exchange (BEI) 2015-2019. In determining the sample using purposive sampling method.The data used are secondary data and the method of analysis used is logistic regression analysis.The results showed that partially Audit Rotation has a positive and significant effect on Audit Quality with a significant value of 0,012. Partially the Audit Tenure has a positive and insignificant effect on Audit Quality with a significant value of 0,346. Partially Auditor Reputation has a positive and significant effect on Audit Quality with a significant value of 0,028. Partially Audit Rotation has a positive and significant effect on Audit Quality with Profitability as a moderating variable with a insignificant value of 0,655. Partially the Audit Tenure has a positive and significant effect on Audit Quality with Profitability as a moderating variable with a insignificant value of 0,720. Partially, Auditor Reputation has a positive and significant effect on Audit Quality with Profitability as a moderating variable with a significant value of 0,000. Simultaneously the Audit Tenure, Audit Committee and Auditor Reputation have a positive and significant effect on Audit Quality with profitability as a moderating variable with a significant value of 0,003.