Auditor Changes Research Articles

Research on the Influence Mechanism of Media Supervision on Audit Fees

As an informal external governance mechanism, media supervision is known as the "fourth party right" independent of the legislative, judicial and administrative systems, and plays the role of "economic police". Its corporate governance effect has been unanimously recognized by scholars at home and abroad. Audit fees have always been a hot issue in the field of finance. There are many factors that affect audit fees, from the characteristics of companies and firms to risk factors such as corporate governance, and then to the external environment. At present, formal external environmental mechanisms such as laws and regulations and government supervision are considered in the study of the influence of external environmental factors on audit fees. Based on the audit contract theory and signal transmission theory, the "agenda-setting" theory of journalism and communication, the "bedding effect" and "framework" theory of psychology as the analytical framework, this paper uses the controllable accrued profit as the measurement index of audit quality, and studies the mechanism of media supervision on the audit quality from the perspective of negative media reports and media supervision environment, as well as the impact of media supervision on the audit quality of auditor changes. The research shows that the degree of negative media coverage of listed companies and the media supervision environment are positively correlated with audit quality.

Penggunaan Fraud Hexagon dalam Mendeteksi Kecurangan Laporan Keuangan

This research aims to examine the fraud hexagon theory in the detection of fraudulent financial reporting that occurs in a company. According to the hexagon fraud theory, fraud occurs due to 6 factors, namely pressure/stimulus, opportunity, capability, ego/arrogance, rationalization, and collusion. These 6 factors are proxied with 10 proxies, namely: financial stability, financial targets, external pressure, change in director, change in auditor, ineffective monitoring, industry nature, number of CEO photos, political connections, and collusion. The population in this research are companies listed in the LQ 45 index period I February-July 2017-2021. The sample in this study is 88 samples. The data analysis approach used is statistic descriptive, classic assumption test, and multiple regression analysis using SPSS 25. The results of this study reveal that the nature of industry and external pressures have a negative effect on the detection of financial statement fraud, and change in auditor positively effect on the detection of financial statements fraud. While the variables of financial stability, financial targets, political connections, change in directors, number of CEO photos, ineffective monitoring, and collusion have no effect in detecting financial statements fraud. This result can be used for companies management as their references about what makes fraudulent financial statements occurs, so they can make preventive action for their companies

PENGARUH FRAUD PENTAGON TERHADAP KECURANGAN LAPORAN KEUANGAN DENGAN KOMITE AUDIT SEBAGAI VARIABEL MODERASI

This study aims to examine and obtain empirical evidence regarding the Effect of Pentagon Fraud on Financial Statement Fraud with the Audit Committee as a Moderating Variable in manufacturing companies in the Basic Industry and Chemical sectors listed on the Indonesia Stock Exchange in 2018–2021. The research sample collection technique used a purposive sampling method, resulting in a sample of 21 companies with a total of 84 observations and using an associative quantitative approach. The data analysis technique used was multiple linear regression analysis, with data processing using Eviews 12. The results showed that the Ineffective Oversight as a Pentagon Fraud mechanism had an effect on Financial Statement Fraud. Financial Stability, Auditor Change, Board of Directors Change, Frequency of Appearance of CEO Images as a Pentagon Fraud mechanism has no effect on Financial Statement fraud. The Audit Committee cannot moderate Financial Stability, Oversight Ineffectiveness, Auditor Change, Directors Change, CEO Image Appearance as a Pentagon Fraud mechanism against Financial Statement Fraud.

Faktor yang mempengaruhi pergantian auditor pada perusahaan yang terdaftar di BEI

This research is able to provide a purpose for conducting analysis and assessment related to the effect of restatement of financial statements, corporate governance, audit company size and replacement of the main director on the change of auditors listed on the IDX in the 2017-2021 period. The data collected as the sample for this study were 1,461 data taken from companies listed on the Indonesia Stock Exchange from 2017 to 2021. The results of this study are certainly able to prove that restatement of financial statements and replacement of the main director have a significant positive effect on auditor turnover compared to governance. company and the size of the audit firm are certainly not able to give an effect on auditor turnover.

Financial Statement Fraud, Audit Committee and Audit Quality: Insight into Fraud Diamond Theory

Based on the Fraud diamond theory, the study investigates whether the audit and quality committee can strengthen or weaken financial statement fraud. this study aims to prove the influence of diamond fraud on the potential for financial statement fraud and that the audit and quality committee can strengthen or weaken the effect of diamond fraud on the potential for financial statement fraud. This study sample was selected using the purposive sampling method and obtained 850 observations from 214 companies’ sector non-financial listed on Indonesia Stock Exchange from 2016-2019. Furthermore, this study uses secondary data obtained from www.idx.co.id and each company's website. Data analysis in this study using logistic regression. The result of this study indicates that variable financial stability, board change, and financial target positively affect the detection of fraudulent financial statements. In contrast, variable external pressure, ineffective monitoring, and auditor change do not affect the detection of fraudulent financial statements. As the first variable moderating in this study, the audit committee does not affect weakening the relationship between fraud diamonds and fraudulent financial statements. On the other hand, audit quality, as the second moderating variable in this study, weakens the relationship between external pressure and ineffective monitoring of fraudulent financial statements. But, audit quality does not weaken the relationship between financial stability, financial target, audit change, and board change on the fraudulent financial statement.

Analisis pengaruh fraud pentagon terhadap fraudulent financial reporting pada perusahaan subsektor consumer goods

The study aims to examine elements of the pentagon's fraud theory that can influence the occurrence of fraudulent financial reporting. The pressure variable is proxied by financial targets; the opportunity is proxied by the ineffectiveness of supervision; the rationalization is proxied with auditor turnover; the competency is proxied by the change of the board of directors, and the arrogance is proxied by the frequency of the appearance of the CEO image. The population used in this study is manufacturing companies in the consumer goods sub-sector listed on the Indonesia Stock Exchange (IDX) in 2019-2021. The results of the study showed that financial targets had a significant negative effect on fraudulent financial reporting. Ineffectiveness of supervision, change of auditors, and changes of the board of directors did not affect fraudulent financial reporting, and the frequency of the appearance of the CEO image had a positive effect on fraudulent financial reporting.

The Anticipation of Mandatory Audit Firm Rotation and Audit Quality

ABSTRACTResearchers and regulators regularly debate whether mandatory audit firm rotation affects audit quality. Theoretically, rotation might improve auditor independence but impair competence. In 2014, the European Commission mandated audit firm rotation for public-interest entities, starting from 2020 for nonfinancial firms. However, any auditor change in the transition period could already be interpreted in light of the upcoming mandatory rotation regime, consistent with anecdotal evidence on such interpretations. These changes provide a unique setting because auditors have strong incentives to build a reputation for high-quality audits when choosing to participate in the market for rotations during the transition period. Using a balanced panel of 287 German firms and data from 2014 through 2019, we hypothesize and find lower discretionary accruals, abnormal working capital accruals, and total accruals in the first year after rotation. This effect is restricted to smaller public companies.Data Availability: The data are from public sources and are available from the third author upon written request.JEL Classifications: M42; M48.

Effect of Financial Stability, External Pressure, Change in Director, Effective Monitoring, Change in Auditor, and Arrogance on Financial Statement Fraud

Effect of Financial Stability, External Pressure, Change in Director, Effective Monitoring, Change in Auditor, and Arrogance on Financial Statement Fraud

Determinants of Fraud Detection Financial Reporting with Company Size as a Moderation Variable

This study aims to explain the possibility of financial statement fraud based on the pentagon’s fraud perspective. The research uses a quantitative approach using secondary data. The research population is in the form of banking companies listed on the Indonesia Stock Exchange in 2020-2021; Sample selection in the form of purposive sampling. The results showed that financial stability, independent commissioners, change in auditors and change of directors, frequency photo CEOs have an insignificant positive effect on the potential for financial reporting fraud. The results of the moderation variables show that the size of the company is able to strengthen the positive influence of independent commissioners, but has not been able to moderate the influence of financial stability, change of auditors, change of directors and frequency photo of CEOs on the potential for financial reporting fraud.

The Relationship between Changes in Corporate Governance Characteristics and Intellectual Capital

The primary goal of this study was to investigate the effects of changes in corporate governance elements on a company’s valuable resources (such as intellectual capital and its components). Previous studies have examined the impacts of some corporate governance characteristics on intellectual capital performance as a whole and they have produced inconclusive and different results. This paper examines the effects of some corporate governance characteristics (i.e., the change in CEO, the evolution of auditor, the change in board independence, and the change in institutional ownership) on intellectual capital and its components (i.e., capital employed, human capital, and structural capital). This research is based on a quantitative study and the selected sample contains 1170 observations from 220 companies listed on the Middle East Stock Exchange from 2011 to 2018. The research findings show a positive and significant relationship between an increase in institutional ownership and intellectual capital and its two components (human capital and structural capital). The results support the relationship between a change in auditor and intellectual capital and human capital efficiency. Further, a positive and significant association was found between an increase in board independence and human capital. However, no relationship was found between a change of CEO and intellectual capital or any of its components. This study extends the research field of corporate governance by studying the effects of changes in corporate governance characteristics on intellectual capital for the first time. Given the significant role of intellectual capital in the performance of firms, this study provides essential information to organisations’ decision makers.

Herbal Pharma Inc.: Conducting an Effective Group Audit*

ABSTRACTAs the relative weight of global economic activity continues to shift toward non‐OECD countries (OECD 2018), audit firms are more likely to encounter clients with significant business operations in foreign jurisdictions. The associated need to engage and oversee local component auditors in these jurisdictions can lead to challenges arising from different business cultures and the resulting intra‐audit miscommunications. Audit deficiencies related to these challenges have been detected by regulators (PCAOB 2011, 2010; CPAB 2012, 2015). Standard setters such as the IAASB and the Auditing and Assurance Standards Board (AASB) have responded by issuing an exposure draft proposing revisions to ISA 600 (IAASB 2020) and CAS 600 (AASB 2020) to strengthen the auditor's approach and provide enhanced guidance to practitioners. In light of this evolving area of assurance, this case was developed to deepen students' understanding of both group and component audits in an international context. The case takes the perspective of the group auditor and features an audit senior in a specialized role overseeing the component audit of a client's increasingly material Chinese subsidiary. Deficiencies in the prior year component audit, along with a change in the component auditor, further underlines the importance of robust risk analysis for the upcoming engagement.

Auditor – client match: timing of auditor change following mismatch and improvement through the change

PurposeThis paper aims to first investigate auditor change following mismatch by focusing on the number of times mismatch occurred prior to auditor change and on clients mismatched continuously with auditors for two or more years. Subsequently, it studies the relation of mismatch in the current year with auditor change for clients mismatched in the past year. These issues are important because of the call for regulatory intervention in auditor selection. If market forces achieve improvement in matching, then those forces should be relied upon in auditor selection.Design/methodology/approachThis paper adapts the literature to estimate mismatch and uses logistic regressions on an auditor change model to study the timing of auditor change by mismatched clients and on a mismatch model to examine improvement in matching following auditor change.FindingsThis paper finds that the more frequent mismatches occurred in the past four years, the higher the likelihood of switching in the current year. Clients mismatched continuously for two or more years are more likely to change auditors. This paper also reports that mismatched clients who switch auditors are less likely to be mismatched again after the switch.Research limitations/implicationsBecause market forces reduce mismatch through auditor change, free choice by clients and auditors should be allowed, and regulatory intervention should be introduced cautiously. As investors and other users of financial statements have an interest in seeing that clients get the appropriate auditors for the audit, they will be assured that market forces could achieve the purpose. Thus, the results of this paper address public concern in the regulatory regime and support current audit market practices.Originality/valuePrior studies assume a one-year time frame for auditor change to follow mismatch. This paper relaxes this assumption, to better reflect audit market practices, by showing that clients who are more often mismatched with auditors or those mismatched continuously for two or more years could also change auditors. Furthermore, prior studies find that mismatching motivates auditor change, but they do not show that matching improves after the change. This paper extends the literature by shedding new light to show that auditor change improves auditor–client matching.

FRAUD PENTAGON DAN ANCAMAN KEBANGKRUTAN STUDI PADA PERUSAHAAN PERBANKAN

The purpose of the study was to determine the effect of the fraud pentagon on the threat of bankruptcy in banking companies listed on the Indonesia Stock Exchange in 2018-2020. The fraud Pentagon consists of five indicators namely external pressure, effective monitoring, auditor turnover, director turnover and the number of frequent CEO photos. While the threat of bankruptcy is measured by the X-Score. The method of data analysis is descriptive and hypothesis testing using multiple linear regression analysis. The research sample is 122 financial statements from 42 banking companies listed on the Indonesia Stock Exchange in 2018-2020. The results showed that external pressure variables and changes in auditors had an effect on the threat of bankruptcy. While the variables of effective supervision, the change of directors and the number of CEO photos that often have no effect on the threat of bankruptcy

Fraud triangle and earnings management based on the modified M-score: A study on manufacturing company in Indonesia

This study combines the concept of a fraud triangle and a modified Beneish M-score to detect factors that trigger earnings management. The modified M-score formula used in this study contains five original and four additional ratios. A sample of 284 manufacturing companies listed on the Indonesia Stock Exchange in the period 2017–2019 is used. Based on the logistic regression test and t-test, the results show that asset growth, changes in receivables to sales, and auditor changes have a negative relationship and debt ratio has a positive relationship with earnings management. In addition, return on assets has no relationship with earnings management. In other words, manipulator firms are subject to greater pressure on leverage and have fewer independent commissioners. This study is the first to utilise the modified Beneish M-score model to detect earnings management in manufacturing companies in Indonesia. The effectiveness of this model makes it a valuable tool in detecting fraud and is expected to be useful for future research.

Determinan Fraud Hexagon Theory dan Indikasi Financial Statement Fraud

This study aims to test the influence of fraud hexagon theory on financial statement fraud. Elements of the causative factors of fraud based on fraud hexagon theory cannot be directly investigated but require proxy variables. Stimulus is projected with financial stability. Opportunity is projected with nature of industry and ineffective monitoring. Rationalization is projected by a change of auditor. Capability is projected with a change of director. Arrogance is projected with a frequent number of CEO's picture. Collution is projected by the ownership of the company by the government or a State-Owned Enterprise or is a private company. The test was conducted on healthcare companies listed on the Indonesia Stock Exchange during the period 2016-2020. Sample selection is done using purposive sampling techniques. Data analysis uses regression panel data. Based on the results of the analysis showed that the variables of financial stability, ineffective monitoring, change in auditor, frequent number of CEO's picture, and state-owned enterprises positively affect financial statement fraud. Nature of industry and change of director have no effect on financial statement fraud. This research provides implications for those who need information about the possibility of financial statement fraud in healthcare companies taking into account influencing factors.
 Keyword : Fraud Hexagon Theory; Financial Statement Fraud; Healthcare Company

Analisis Reaksi Pasar dan Pergantian Auditor Sebelum dan Sesudah Restatement

The purpose of this study is to analyze whether there are differences in market reactions and auditor changes before and after the restatement the company. In this study, three variables were used, market reaction, auditor changes and restatement. This research used quantitative method. The populations are all company listed on Indonesia Exchange IDX in the period of 2017 to 2019 taken with purposive sampling method. The test method uses the Wilcoxon Signed Rank-Test test because the normality test shows that the data are not normal. The data were processed using IBM SPSS Statistics 26. The results show that there is a difference in the average abnormal return before and after the restatement; there is no difference in the average trading volume activity before and after the restatement; and there is no difference in the change of auditors before and after the restatement because the change of auditors has been regulated in Indonesian regulations.

The Effect Of Financial Distress And Profitability On Auditor Change In Consumption Goods Sector Companies Listed On The Indonesia Stock Exchange In 2018-2021

This research is entitled influence, financial distress, and profitability of changing auditors in consumer goods sector companies listed on the Indonesia Stock Exchange in 2018-2021. The purpose of this study is to find out how financial distress and profitability of auditor changes. This study uses logistic regression by analyzing the factors that have occurred. This study uses secondary data with a population of 52 companies and a sample of 23 companies, namely companies in the consumer goods sector on the IDX. This research produces interesting findings, including financial distress which has a significant effect on auditor turnover. Meanwhile, the profitability variable has no effect on auditor turnover. The impact of the results of this study is the determination of the variables used by 37.5%, there are still 62.5% of other variables that can be used as further research such as corporate governance variables, operational complexity, ownership structure.

The Influence of Audit Findings, Auditor Change, Local Government Size, Leverage and Silpa on BPK Audit Opinions of Local Governments in Indonesia

This study aims to examine and find empirical evidence of the effect of audit findings, auditor turnover, local government size, leverage and SiLPA (Budget Overtime) on local government BPK audit opinions in Indonesia. This study used a sample of 506 from a total of 514 local governments (districts and cities) throughout Indonesia with the observation year 2017 – 2020, so the total sample used was 1,915. The type of data used in this research is secondary data. The research data source was obtained through the Information Management and Documentation Officer Electronic service (E-PPID) at http://e-ppid.bpk.go.id. The sampling method uses purposive sampling, while the data analysis technique uses multiple linear regression analysis. The study results show that audit findings, local government size and leverage affect local government audit opinions. At the same time, auditor turnover and SiLPA do not affect local government audit opinions in Indonesia. Furthermore, from the results of this study, the variables that can be examined in subsequent studies include performance reports, audit quality, years of service/auditor experience, amount of capital expenditure, Special Allocation Funds received by local governments and qualifications of local government financial report preparers. In addition, the distribution of local governments according to island location will also be an exciting audit opinion study.

Determinants and consequences of auditor switching during fiscal year‐end audit fieldwork

We compare a group of firms switching auditors while their annual audit is underway (LateSwitches) with two control groups: firms switching their auditors during the fourth quarter of the fiscal year and firms switching their auditors during the first three quarters. First, we find that LateSwitches tend to be riskier with regard to litigation risk, audit risk and business risk. Second, we find that LateSwitches have a higher chance of announcing restatements and receiving going concern opinions in the first year of audit with the successor auditor. Despite the higher risks, we fail to find that LateSwitches disclose more adverse events in Forms 8‐K than other groups. We also document that stock market returns following an auditor change are more negative for LateSwitches. These results indicate that LateSwitches stand to face significant negative consequences when the relationship with their auditor is terminated abruptly in the final phases of an audit.

Analysis of factors affecting fraudulent financial reporting in fraud pentagon perspective

The data from ACFE show that Indonesia, in the 2014-2020 period, had 126 cases of fraud, ranking the country as the second-highest country with the most fraud cases in the Asia Pacific. This phenomenon attracts the author to investigate factors that encourage the emergence of fraudulent financial reporting from the perspective of the Fraud Pentagon theory. Although many studies have been done on this topic, the results of the previous studies have not shown any uniformity or, even, consistency between theory and empirical reality. This study focus on a similar topic, but with a different object and approach. The objects studied in this study are utility, transportation, and infrastructure companies listed on the Indonesia Stock Exchange in the 2015-2019 period; Meanwhile, for the testing technique, this research applies several computational techniques, ranging from the Classical Assumption Test to the hypothesis test using the IBM SPSS 25 analysis tool Data were obtained from 185 samples selected using the purposive judgment sampling method. The data, then, were analyzed using multiple linear regression analysis. The results of this study indicate that not all of the factors studied influence fraudulent financial reporting. Of the seven hypotheses proposed, only the financial target variable has a positive effect on fraudulent reporting. Similarly, the nature of the industry variable also influences fraud, but in the opposite direction (negative). Meanwhile, the other five variables, namely: external pressure, monitoring effectiveness, change in auditors, change in directors, and dual CEO positions do not indicate having significant influences. This study has several limitations, dealing with measurement techniques and the reliance on information attached to the company's financial statements, which might have been manipulated before. These limitations indicate that further research on this topic is needed to obtain better results.