Does Auditor Tenure Reduce Audit Quality?

https://doi.org/10.22146/gamaijb.5478

- Junaidi(1*), Setiyono Miharjo(2), Bambang Hartadi(3)

(1) Faculty of Informatics Technology and Business, Universitas Teknologi Yogyakarta (UTY)
(2) Faculty of Economics and Business, Universitas Gadjah Mada
(3) Faculty of Informatics Technology and Business UTY
(*) Corresponding Author

Abstract


Reduced auditor independence and the rise of corporate accounting manipulations have caused trust of the users in audited financial statements to begin to decline, so users of financial statements are questioning whether public accountants are independent parties. This research issue is related to the Decree of the Minister of Finance No. 17 in 2008 about public accountant services. Giving attestation services, in the form of financial statements about an entity, are conducted by the audit firm for no longer than 6 consecutive fiscal years and by a public accountant for 3 consecutive fiscal years at the longest. The purpose of this research is to examine empirically the influence of auditor tenure on audit quality. Auditor tenure is measured as the length of the auditor-client relationship. Audit quality is measured by the propensity of auditors to issue a going-concern opinion. This study uses a sample of firms listed on the Indonesia Stock Exchange during the 2003-2008 period. Research analysis uses logit model to measure the effect of auditor tenure on the auditors’ propensity to publish a going-concern opinion. The hypothesis which states that the length of auditor tenure influences negatively the propensity of auditors to issue a going-concern opinion is statistically supported. This research is expected to provide empirical evidence about the importance of limiting of the auditor-client relationship.
       

Full Text:

PDF


References

BAPEPAM-LK. 2008. Keputusan Nomor: KEP-310/BL/2008: Independensi Akuntan yang Memberikan Jasa di Pasar Modal. www.bapepam.go.id.

Bazerman, M. H., K. P. Morgan, and G. F. Loewanstein. 1997. The Impossibility of auditor independence. Sloan Management Review 38 (Summer): 89-94.

Bellovary, J. L., D. E. Giacomino, and M. D. Akers. 2007. A review of going concern prediction studies: 1976 to present. Journal of Business & Economics Research (2): 9-27.

Carcello, J. V., and A. L. Nagy. 2004. Audit firm tenure and faudulent financial reporting. Auditing: A Journal of Practice & Theory 23 (2): 55-69.

Carey, P., and R. Simnett. 2006. Audit partner tenure and audit quality. The Accounting Review 81 (3): 653-676.

Chen, C. J. P., and S. Chen, X. Su. 2001. Profitability regulation, earnings management and modified audit opinions: evidence from China. Auditing: A Journal of Practice and Theory 20: 9-30.

Davis, L. R., D. N. Ricchiute, and G. Trompeter. 1993. Audit Effort, Audit Fees, and the Provision of on Audit Services to Audit Clients. The Accounting Review 68 (January): 135-150.

DeFond, M. L., K. Raghunandan, and K. R. Subramanyam. 2002. Do non-audit service fees impair auditor independence? Evidence from going concern opinion decisions. Journal of Accounting Research (June): 1247–1274.

Deangelo, L. E. 1981. Auditor independence, ‘lowballing’, and disclosure regulation. Journal of Accounting and Economics: 113-127.

Dopuch, N., R. King, and R. Schwartz. 2003. Independence in Appearance and in Fact: An Experimental Investigation. Contemporary Accounting Research 20: 79-115.

Dopuch, N., R. W. Holthausen, and R. W. Leftwich. 2004. Predicting audit qualification with financial and market variables. The Accounting Review LXIII (3): 117-128.

Dye, R. 1991. Informationnaly motivated auditor replacement. Journal of Accounting and Economics 14 (4): 347-374.

Fanny, M., and S. Saputra. 2005. Opini Audit Going Concern: Kajian Berdasarkan Model Prediksi Kebangkrutan, Pertumbuhan Perusahaan, dan Reputasi Kantor Akuntan Publik (Study pada Emiten Bursa Efek Jakarta). Prosiding SNA VIII, Solo.

Geiger, M. A., and K. Raghunandan. 2002. Auditor Tenure and Audit Reporting Failures. Auditing: A Journal of Practice & Theory 21 (1): 67-78.

Geiger, M. A., and D. V. Rama. 2006. Audit firm size and going concern reporting accuracy. Accounting Horizons 20 (1): 1-17.

Ghosh, A., and D. Moon. 2004. Auditor tenure and perceptions of audit quality. Journal of Business Finance and Accounting 80 (2): 209-247.

Haron, H., B. Hartadi, M. Ansari, and I. Ismail. 2009. Factors influencing auditor’s going concern opinion. Asian Academy of Management Journal 14 (1): 1-19.

Hoyle, J. 1978. Mandatory auditor rotation: The arguments and an alternative. Journal of Accountancy 145 (5): 69-78.

Ikatan Akuntan Indonesia. 2001. Standar Profesional Akuntan Publik, Jakarta: Salemba Empat.

Januarti, I., and E. Fitrianasari. 2008. Analisis rasio keuangan dan rasio non keuangan yang mempengaruhi auditor dalam memberikan opini going concern pada auditee: Studi empiris pada perusahaan manufaktur yang terdaftar di BEJ tahun 2000-2005. Jurnal Maksi UNDIP 8 (1): 43-58.

Jensen, M., and W. Mecking. 1976. Theory of the firm: Managerial behaviour, agency costs and ownership stucture. Journal of Financial Economics 3 (4): 305-360.

Knechel, W. R., and A. Vanstraelen. 2007. The relationship between auditor tenure and audit quality implied going concern opinions. Auditing: A Journal of Practice and Theory 26 (1): 113-131.

Komalasari, A. 2004. Analisis pengaruh kualitas opini auditor dan proxy going concern terhadap opini auditor. Jurnal Akuntansi dan Keuangan 9 (2): 1-14.

Koh, H. C., and S. S. Tan. 1999. A neural network approach to the prediction of going concern status. Accounting and Business Research 29 (3): 211-216.

Lennox, C. 1999. Are large auditors more accurate than small auditors? Accounting and Business Research 29 (3): 217-227.

Lim, C., and H. Tan. 2010. Does auditor tenure improve audit quality. Contemporaryy Accounting Research 27 (1): 923-957.

Mansi, S., W. Maxwell. and D. Miller. 2004. Does auditor quality and tenure matter to investor? Journal of Accounting Research 23 (2): 17-30.

Manry, D. L., T. J. Mock, and J. L. Turner. 2008. Does increased audit partner tenure reduce audit quality? Journal of Accounting, Auditing & Finance: 553-572.

Mautz, R. K., and H. A. Sharaf. 1961. The philosophy of auditing. American Accounting Association Monograph. Sarasota, Florida: American Accounting Assosiation.

Mayangsari, S. 2003. Pengaruh keahlian audit dan independensi terhadap pendapat audit: Sebuah kuasi eksperimen. Jurnal Riset Akuntansi Indonesia 6 (1): 1-22.

Menon, K., and K. B. Schwartz. 1987. An empirical investigation of audit qualification decision I presence of going concern uncertainties. Contemporary Accounting Research 3 (2): 302-315.

Mutchler, J. F. 1984. Auditors’ perceptions of the going-concern opinion decision. A Journal of Practice & Theory 3 (2): 17-30.

Mutchler, J. F. 1986. Empirical evidence regarding the auditor’s going concern opinion decision. Auditing: A Journal of Practice and Theory 6 (1):148-163.

Mutchler, J. F., W. Hopwood, and J. M. McKeown. 1997. The influence of contrary information and mitigating factors on audit opinion decisions on bankrupt companies. Journal of Accounting Research 35 (2): 295-310.

Myers, J., I. Myers, and T. Omer. 2003. Exploring the term of auditor-client relationship and the quality of earnings: A case for mandatory auditor rotation? The Accounting Review 78 (3): 779-798.

O’Keefe, R., D. Simunic, and M. Stein. 1994. The production of audit services: Evidence from a major public accounting firm. Journal of Accounting Research 32 (2): 241-261.

Peraturan Menteri Keuangan. 2008. Peraturan Menteri Keuangan Nomor: 17/Pmk. 01/2008 Tentang Jasa Akuntan Publik. www.depkeu.go.id.

Purba, M. P. 2009. Asumsi Going Concern: Suatu Tinjauan Terhadap Dampak Krisis Keuangan. Graha Ilmu.

Santosa, A. F., and L. K. Wedari. 2007. Analisis faktor faktor yang mempengaruhi kecendeunagan penerimaan opini audit going concern. JAAI 11 (2): 141-158.



DOI: https://doi.org/10.22146/gamaijb.5478

Article Metrics

Abstract views : 2454 | views : 2424

Refbacks

  • There are currently no refbacks.




Copyright (c)