Audit quality and audit report lag: case of Indonesian listed companies

2017 ◽  
Vol 25 (2) ◽  
pp. 191-210 ◽  
Author(s):  
Rusmin Rusmin ◽  
John Evans
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Two Dimensions ◽  
Manufacturing Companies ◽  
Audit Report ◽  
Home Office ◽  
Content Type ◽  
Big 4 ◽  
Auditor Quality ◽  
Industry Specialist

Purpose The purpose of this paper is to empirically examine the relation between two dimensions of auditor quality, namely, auditor industry specialization and auditor reputation and the audit report lag. Design/methodology/approach The data collection focuses on companies listed on the Indonesia Stock Exchange for the financial year of 2010 and 2011. To ensure data homogeneity and reduce industry bias, this study focuses solely on manufacturing companies identified by the Indonesian Capital Market Directory. Findings This study finds a negative and significant association between industry-specialist auditors and audit report timeliness. Companies audited by industry-specialist auditors have shorter audit delays. The authors also find evidence that Big 4 auditors perform significantly faster audit work than their non-Big 4 counterparts. In addition, this study reports a statistical and significant relationship between auditing complexity, companies’ profitability, auditors’ business risk, and industry classification and audit report lag. The results show that firms with a large number of subsidiaries and firms experiencing poorer financial performance are found to be associated with longer reporting delays. Moreover, audit report timeliness is found to be faster for companies in the low-profile industry sector and owned by family members. Research limitations/implications Similar to other empirical investigations, this study is not without certain caveats. First, the period of audit report lag in this study reflects the audit work from the year-end to the audit report date. The authors do not consider audit work conducted outside this period in the analysis. Second, there are numerous control variables and although the authors have attempted to capture those variables to maintain the integrity of the research there are likely other excluded variables that may be important in explaining audit report timeliness. Finally, there are other factors, for example, an administrative approval process with the audit firm home office, which can affect audit report lags but have not been included in the model analysis. Future studies can seek to focus on refinements to the proxy measures for dependent and experimental variables. Practical implications Insights drawn from this study may be of assistance to policy makers as they consider the costs and benefits associated with varying levels of audit market concentration as well as providing a snapshot of the level of non-compliance on audit timeliness in Indonesia. Originality/value This study provides further empirical evidence on the relation between auditor quality and audit report lag using data from a different domestic setting. This study also enriches the auditor quality literature by employing industry-specialist and Big 4 auditors as a predictor for the timeliness of audit reports.

scholarly journals ANALISIS DETERMINAN AUDIT REPORT LAG

2018 ◽  
Vol 10 (1) ◽  
pp. 22-27
Author(s):  
Gilang Satrya Ramadhan ◽  
Majidah Majidah ◽  
Eddi Budiono
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Regression Method ◽  
Test Results ◽  
Significant Positive Effect ◽  
Manufacturing Companies ◽  
Audit Report ◽  
Multiple Regression Method ◽  
Negative Effect ◽  
Positive Effect

The purpose of this research is to determine the effect of leverage, size of company, audit quality and accounting result simultaneously or partially to the audit report lag. The type of this research is descriptive verificative. The number of manufacturing companies in the Indonesia Stock Exchange (BEI) over the period of 2011-2015 are 143 companies, then obtained a sample of 110 by purposive sampling. Analysis of data is carried out using multiple regression method. The results showed variable leverage, size company, audit quality and accounting result can explain audit report lag 33.3%. Partial test results showed that leverage did not significantly affect, size company and accounting result have a significant negative effect and audit quality have a significant positive effect on audit report lag.

scholarly journals Hubungan Managerial Entrenchment dan Kualitas Audit dengan Kualitas Laba

2020 ◽  
Vol 5 (1) ◽  
pp. 13
Author(s):  
Nibras Anny Khabibah
Keyword(s):  
Audit Quality ◽  
Stock Exchange ◽  
Earnings Quality ◽  
Control Variable ◽  
Manufacturing Companies ◽  
Managerial Entrenchment ◽  
Big 4 ◽  
Ceo Tenure ◽  
The Relationship

Abstrak: Penelitian ini bertujuan untuk mengidentifikasi hubungan managerial entrenchment, kualitas audit, dan kualitas laba. Penelitian ini dilakukan dengan menggunakan 76 sampel perusahaan manufaktur yang terdaftar di BEI dari tahun 2016-2018 (228 observasi). Managerial entrenchment diukur dengan lamanya CEO menduduki posisinya (CEO tenure), kualitas audit diukur dengan status KAP sebagai KAP big 4 atau bukan, sedangkan kualitas laba diidentifikasi dengan akrual diskresioner yang dimiliki oleh perusahaan. Penelitian ini juga menggunakan variabel kontrol yang terdiri dari leverage, ukuran perusahaan, dan profitabilitas perusahaan. Hasil penelitian menunjukkan bahwa managerial entrenchment perusahaan manufaktur di Indonesia pada tahun penelitian dilakukan tidak berhubungan dengan kualitas laba, sebaliknya kualitas audit terbukti dapat meningkatkan kualitas laba perusahaan. Selanjutnya, dari ketiga varibel kontrol yang digunakan, hanya profitabilitas yang terbukti berhubungan dengan kualitas laba.   Kata kunci: managerial entrenchment, kualitas audit, kualitas laba     Abstract: This study aims to identify the relationship between managerial entrenchment, audit quality, and earnings quality. This research was conducted using 76 samples of manufacturing companies listed in the Indonesian Stock Exchange from 2016-2018 (228 observations). Managerial entrenchment is measured by the length of CEO occupying his position (CEO tenure), Audit quality is measured by KAP status as big 4 or not, while earnings quality is identified by companies’ discretionary accruals. This study also uses a control variable consisting of leverage, company size, and company profitability. The results showed that the managerial entrenchment of manufacturing companies in Indonesia in the year of the study was not related to earnings quality, on the contrary audit quality was proven to be able to improve the earnings quality of the company. Furthermore, from the three control variables used, only profitability has been proven to be related to earnings quality.   Keywords: managerial entrechment, audit quality, earnings quality

How auditor locality affects audit report timeliness

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ameneh Bazrafshan ◽  
Simin Dehghani Madise
Keyword(s):  
Corporate Governance ◽  
Empirical Evidence ◽  
Audit Committee ◽  
Stock Exchange ◽  
Audit Committees ◽  
Audit Report ◽  
Content Type ◽  
Auditor Quality ◽  
The Relationship ◽  
Linear Regressions

Purpose Despite extensive research on the determinates of audit report timeliness, there is limited empirical evidence on the effect of auditor locality on audit report timeliness. Therefore, this study aims to examine the relationship between auditor locality and audit report timeliness. Furthermore, this study investigates the moderating roles of audit committee, corporate governance and auditor quality in this relationship. Design/methodology/approach In this study, the information of 157 companies listed on the Tehran Stock Exchange during the period 2013–2019 has been collected. Moreover, multivariate linear regressions were used to test the hypotheses. Findings Findings show that in general, there is no significant relationship between auditor locality and audit report timeliness. However, empirical evidence suggests that in companies with specialized audit committees, strong corporate governance and high-quality auditors, auditor locality improves audit report timeliness. Originality/value Overall, the results indicate that there are some circumstances in which auditor locality affects the audit report timeliness. Specifically, the association of auditor locality and audit report timeliness is conditional to audit committee, corporate governance and auditor quality.

Choosing an external auditor: does the composition of boards of directors matter?

2017 ◽  
Vol 59 (3) ◽  
pp. 394-412 ◽  
Author(s):  
Mishari M. Alfraih
Keyword(s):  
Boards Of Directors ◽  
Audit Quality ◽  
Stock Exchange ◽  
Board Composition ◽  
High Quality ◽  
Content Type ◽  
Audit Firm ◽  
Auditor Choice ◽  
Big 4 ◽  
External Auditor

Purpose This paper aims to investigate the association between the composition of boards of directors and the choice of external auditor among companies listed on the Kuwait Stock Exchange (KSE) in 2013. Design/methodology/approach Consistent with prior research, audit quality is represented by two proxies, namely, a Big 4 and Non-Big 4 audit firm. Independence, diversity, interlocks, size and role duality are used as proxies for board composition. To accommodate the dichotomous dependent variable (auditor choice), a logistic regression model is used to test the hypothesized associations between board composition and auditor choice. Findings After controlling for firm-specific characteristics, results show that independence, diversity and size are statistically significant and increase the likelihood that a KSE-listed company selects a high-quality (Big 4) audit firm. Role duality is also statistically significantly but decreases the likelihood of choosing a Big 4 audit firm. Practical/implications This research has implications for regulators, shareholders, boards and academics. The paper underlines the importance of the composition of the board in increasing the likelihood of hiring a high-quality audit firm. Regulators can draw upon these results when assessing the effectiveness of corporate governance mechanisms. Originality/value This paper is among the first to study the association between auditor choice and board composition using data from the frontier market of Kuwait, thus responding to the call for empirical research into the issue in less-developed markets. Overall, it sheds light on the effectiveness of board composition and provides empirical evidence that it is an important element in the choice of auditors. The findings indicate that board composition may be a mechanism that can promote demand for high audit quality.

scholarly journals NILAI PERSEDIAAN, ASET TETAP, UKURAN PERUSAHAAN, KUALITAS AUDIT, DAN AUDIT TENURE TERHADAP AUDIT REPORT LAG

2019 ◽  
Vol 1 (2) ◽  
pp. 143-157
Author(s):  
Sarah Nuriela Sabatini ◽  
Mekani Vestari
Keyword(s):  
Firm Size ◽  
Significant Influence ◽  
Audit Quality ◽  
Stock Exchange ◽  
Secondary Data ◽  
Manufacturing Companies ◽  
Audit Report ◽  
Financial Reports ◽  
Purposive Sampling ◽  
Fixed Assets

The purpose of research is to obtain empirical evidence of the effect of inventory value, fixed assets, firm size, audit quality and audit tenure on audit report lag by using the financial reports statements of manufacturing companies listed on the Indonesia Stock Exchange. The examined factors of this research are from inventory value, fixed assets, firm size, audit quality, and audit tenure as the independent variable, while the audit report lag as the dependent variable. The sample consists of 324 companies listed on the Indonesia Stock Exchange (IDX) and submitted financial reports to OJK in the period 2015-2017. The data that was used in this research was secondary data and selected by using purposive sampling method. This study used purposive sampling and multiple linear regression as the analysis method. The results of this study indicate that the variable fixed assets, and the size of the company have a significant influence to the audit report lag, while the variable value of inventory, audit quality and audit tenure did  not have  significant influence to the audit report lag.

scholarly journals Audit Report Lag: Specialized Auditor and Corporate Governance

2020 ◽  
Vol 8 (1) ◽  
pp. 41-48
Author(s):  
Arya Pradipta ◽  
Arvivid Gracenia Zalukhu
Keyword(s):  
Corporate Governance ◽  
Audit Committee ◽  
Stock Exchange ◽  
Financial Statements ◽  
Jel Classification ◽  
Ownership Concentration ◽  
Board Independence ◽  
Manufacturing Companies ◽  
Audit Report ◽  
Auditor Quality

Objective - This paper aims to obtain empirical evidence about the influence of specialized auditors, audit tenure, audit committee, board independence, ownership concentration, and auditor quality on audit report lag in Indonesian manufacturing firms. Methodology/Technique – The population is all manufacturing companies listed on the Indonesia Stock Exchange between 2010 and 2016. Multiple linear regressions was used as the data analysis method. Finding - The results of this research show that specialized auditors, board independence, ownership concentration and auditor quality all have an influence on audit report lag. Meanwhile, audit tenure and audit committee do not have an influence on audit report lag. Novelty - Specialized auditors will provide better performance than non-specialized auditors. Specialized auditors will apply more appropriate planning and monitoring on the audit procedure. Specialized auditors need longer time to audit financial statements, which effects audit report lag. The presence of an independent board requires higher quality financial statements. Thus, the auditor needs to put more effort into the verification process of financial statements. The largest shareholders tend to be committed and responsible to the company’s reputation. Managers will demand the audit report lag in a timely manner, in order to maintain the trust and satisfaction of the company’s largest shareholders. Type of Paper: Empirical. Keywords: Audit Report Lag; Specialized Auditor; Board Independence; Ownership Concentration; Auditor Quality. Reference to this paper should be made as follows: Pradipta, A; Zalukhu, A.G. 2020. Audit Report Lag: Specialized Auditor and Corporate Governance, Global J. Bus. Soc. Sci. Review 8(1): 41 – 48. https://doi.org/10.35609/gjbssr.2020.8.1(5) JEL Classification: G30, M42.

Does ownership structure affect the quality of auditor pair composition?

2017 ◽  
Vol 15 (2) ◽  
pp. 245-263 ◽  
Author(s):  
Mishari M. Alfraih
Keyword(s):  
Logistic Regression ◽  
Ownership Structure ◽  
Audit Quality ◽  
Negative Impact ◽  
Stock Exchange ◽  
Multinomial Logistic Regression ◽  
Emerging Market ◽  
Government Ownership ◽  
Content Type ◽  
Big 4

Purpose This study examines the effects of institutional and government ownership on audit quality in Kuwait. Kuwait provides an interesting regulatory context as listed firms are legally required to appoint two external auditors from different auditing firms. This offers a unique opportunity to examine differentiation in demand for audit quality when there are three potential combinations of auditors: two non-Big 4, one Big 4 and one non-Big 4 and two Big 4. Design/methodology/approach The sample consists of all firms listed on the Kuwait Stock Exchange in 2013. Multinomial logistic regression examines the influence of ownership structure on audit quality. Analyses are controlled for the effect of company characteristics. Control variables are: firm size, complexity, growth, leverage, profitability and industry category. Findings The results show that institutional ownership is positively related to the number of Big 4 auditing firms that audit a company’s financial statements. This reflects the powerful and influential role institutional investors play in discouraging management from choosing lower-quality providers. In contrast, government ownership has a negative impact on audit quality. These findings are consistent with the hypothesis that audit quality is a function of, among other factors, the structure of equity ownership. Practical implications Given the importance of audits, knowledge of the determinants of audit quality is of particular interest to regulators, enforcement agencies and investors. The findings imply that different ownership structures have different effects on the demand for audit quality; some structures strengthen it, while others weaken it. The negative relation between government ownership and audit quality raises serious questions about the effectiveness of government in monitoring its investments. Originality/value This paper extends the literature by investigating the determinants of the choice of auditors in an emerging market where there is a joint audit requirement. It highlights the important role played by ownership structure in shaping demand for audit quality. A distinguishing feature in previous research is the classification of the audit quality proxy into two choices (Big 4 vs non-Big 4 auditors). However, the regulatory context in Kuwait means that there are three choices. Thus, unusually, a multinomial logistic regression is used for the analysis.

scholarly journals The effects of auditor switching towards abnormal return in manufacturing company

2019 ◽  
Vol 4 (1) ◽  
pp. 157-168
Author(s):  
Filmiar Yunida Nawangsari ◽  
Iswajuni Iswajuni
Keyword(s):  
Abnormal Return ◽  
Stock Exchange ◽  
Control Variable ◽  
Manufacturing Companies ◽  
Content Type ◽  
Return On Equity ◽  
Auditor Switching ◽  
Natural Logarithm ◽  
Big 4 ◽  
Adjusted Model

Purpose The purpose of this paper is to examine the effects of simultaneous and partial auditor switching toward the abnormal return of manufacturing companies listed in Indonesia Stock Exchange between 2009 and 2012. Design/methodology/approach Auditor switching is divided into some types: lateral Big 4 to Big 4 (B4B4), lateral non Big 4 to non Big 4 (NB4NB4), cross-up (CU) and cross-down. The abnormal return is measured with a market-adjusted model. In this study, company size is used as the control variable and is measured using the natural logarithm of the total assets (LnTA) and return on equity. Multiple linear regression is used for analysis with significant value a= 5 percent. The hypotheses were tested using f-test and t-test. Findings The result shows that simultaneous auditor switchings affect the abnormal return. In partial auditor switching, only CU switch has effects on the abnormal return. Originality/value This study provides additional literature on the effect of auditor switching, especially on an abnormal return.

scholarly journals Earnings Management Through Real Activities: The Role Of Audit Quality And Ownership Structure

2021 ◽  
Vol 12 (3) ◽  
pp. 5129-5141
Author(s):  
Istianing Sih
Keyword(s):  
Earnings Management ◽  
Ownership Structure ◽  
Production Cost ◽  
Audit Quality ◽  
Stock Exchange ◽  
Auditor Independence ◽  
Manufacturing Companies ◽  
The Public ◽  
Final Sample ◽  
Auditor Quality

This study aims to examine the effect of audit quality and ownership structure on earnings management through real activities. The audit quality tested is the size of the public auditor's office and auditor independence. The ownership structure that has been examined for its impact on management management is institutional ownership, managerial ownership, and foreign ownership. Earnings management through real activities is measured by three methods, namely abnormal cash flow from operation (CFO), abnormal discretionary expense, and abnormal production cost. The sample of this research is manufacturing companies listed on the Indonesia Stock Exchange from 2016 to 2018. With the purposive sampling method, the final sample is 175 company-years. The results showed that auditor quality and ownership structure had no effect on earnings management as measured by abnormal CFO. Meanwhile, abnormal production cost is not proven to be influenced by ownership structure but is negatively affected by audit quality as measured by Auditor Firm size. Ownership structure and audit quality are proven to have an effect on earnings management, which is measured by abnormal discretionary expense.

The effect of auditor narcissism on audit market competition

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hojat Mohammadi ◽  
Mahdi Salehi ◽  
Meysam Arabzadeh ◽  
Hassan Ghodrati
Keyword(s):  
Financial Markets ◽  
Significant Relationship ◽  
Design Methodology ◽  
Audit Quality ◽  
Stock Exchange ◽  
Market Competition ◽  
Competitive Pressure ◽  
Content Type ◽  
Listed Firms ◽  
Audit Market

Purpose This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure). Design/methodology/approach This paper’s method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2018 using a sample of 188 firms (1,310 observations). The method used for hypothesis testing is linear regression using panel data. Findings The results show a negative and significant relationship between auditor narcissism and audit market competition and its indices, including auditor concentration, clients’ concentration and competitive pressure. Moreover, a positive and significant relationship was observed between audit quality and audit market competition and its indices, including auditor concentration, client concentration and competitive pressure. Originality/value To analyzes competition indices in the audit market (auditor concentration, clients’ concentration and competitive pressure). The variable is assessed once more using the exploratory factor analysis of the so-called three variables single variable, named audit market competition. So the central question of the study is investigated within a broader sense. Moreover, as the present study is carried out in the emergent financial markets with extremely competitive audit markets to figure out the effect of auditors’ intrinsic characteristics on such markets’ competitiveness, it can provide useful information in this field.

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