Analysis of the Effect of Public Accountant Firm Size, Auditor Tenure, Auditor Rotation, and Type of the Auditor Rotation on the Audit Quality

Fajrullah, Fajrullah (2017) Analysis of the Effect of Public Accountant Firm Size, Auditor Tenure, Auditor Rotation, and Type of the Auditor Rotation on the Audit Quality. Diploma thesis, Universitas Andalas.

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Abstract

This research is aimed to empirically examine the effect of public accountant firm size, auditor tenure, auditor rotation, and type of the auditor rotation on the audit quality. Based on the literature review, the study hypothesized that public accountant firm size and mandatory auditor rotation relate to higher audit quality, while audit tenure, auditor rotation, and pseudo mandatory auditor rotation relate to lower audit quality. This research used abnormal working capital accruals (AWCA), following Carey and Simnett’s (2006) study as the proxy for audit quality. This research used 101 nonfinancial companies listed on Indonesia Stock Exchange (IDX) from 2002 – 2015 that been chosen by using the purposive sampling method. To analyze the effect of independent variables on the dependent variable, data were analyzed by using multiple regression analysis. The empirical results shows that, public accountant firm size, mandatory auditor rotation, and pseudo mandatory auditor rotation that have significant influence on audit quality, while audit tenure and auditor rotation have insignificant influence. The result concluded that auditor tenure, auditor rotation, and mandatory auditor rotation relate to higher audit quality. Meanwhile, public accountant firm size and pseudo mandatory auditor rotation relate to lower audit quality. Keywords: public accountant firm size, auditor tenure, auditor rotation, type of auditor rotation, audit quality, abnormal working capital accruals

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