KAP size does not have a significant effect on audit quality

Oct 13, 2025 by windailys.com 26 views

Analysis of Factors Affecting Audit Quality in Banking Companies Listed on the Indonesia Stock Exchange

Introduction

Audit quality is a crucial aspect in the financial world, as it guarantees the credibility and reliability of financial information. High-quality audits are essential for maintaining public trust in companies, and investors, creditors, and other related parties rely on audited financial statements to make informed decisions. However, various factors can affect audit quality, both positively and negatively. This study aims to examine the effect of various factors on audit quality in banking companies listed on the Indonesia Stock Exchange (IDX) for the 2010-2012 period.

Background

Previous research on audit quality has resulted in various findings, which highlights the need for further research to validate existing theories and reveal the influence of specific factors in the Indonesian context. The Indonesian Stock Exchange (IDX) is one of the largest stock exchanges in Southeast Asia, and banking companies listed on the IDX play a significant role in the country's economy. Therefore, it is essential to understand the factors that influence audit quality in these companies.

Research Objectives

The primary objective of this study is to examine the effect of various factors on audit quality in banking companies listed on the IDX for the 2010-2012 period. The specific objectives of this study are:

To examine the effect of the size of the public accountant firm (KAP) on audit quality.
To examine the effect of audit term (audit tenure) on audit quality.
To examine the effect of company size (client firm size) on audit quality.
To examine the effect of corporate leverage (client firm leverage) on audit quality.
To examine the joint effect of KAP size, audit term, company size, and company leverage on audit quality.

Methodology

The population of this study was all banking companies listed on the IDX in the 2010-2012 period. The variables studied include:

Size of the Public Accountant Firm (KAP): The size of the KAP is measured by the number of auditors owned.
Audit Term (Audit Tenure): The term of office of the audit is measured by the length of the KAP auditing the company.
Company Size (Client Firm Size): The size of the company is measured by the total assets of the company.
Corporate Leverage (Client Firm Leverage): The company's leverage is measured by the debt to equity ratio.
Audit Quality: Audit quality is measured using the audit quality assessment model that is commonly used.

The data used in this study were obtained from the company's financial statements published on the official IDX website (www.idx.co.id). The sampling method used is purposive sampling. Data analysis was carried out using logistics regression with the help of SPSS 20 applications.

Results

The results of this study showed that:

KAP size does not have a significant effect on audit quality, with the direction of negative influence. This indicates that the large KAP size does not guarantee a higher audit quality.
The term of audit office has a significant effect on audit quality, with the direction of negative influence. That is, the longer the KAP audits the company, audit quality tends to decrease.
Company size does not significantly effect on audit quality, with the direction of negative influence.
Leverage the company has no significant effect on audit quality, with the direction of positive influence.
KAP size, audit term, company size, and company leverage jointly have a significant effect on audit quality.

Discussion

The findings of this study provide a complex picture of the factors that influence audit quality in banking companies in Indonesia. The results suggest that the size of the KAP does not guarantee a higher audit quality, and the term of audit office has a negative effect on audit quality. The study also found that company size and leverage do not have a significant effect on audit quality.

Additional Analysis and Explanation

The Effect of Audit Term: The findings that the audit term has a negative effect on audit quality can be interpreted as the existence of a "familiarity effect" (Familiarity Bias) where the KAP that is too long audits the company can lose objectivity and independence in conducting audits.

The role of the combined factor: The results of the study show that the factors studied together affect the audit quality, indicating that audit quality is the result of complex interactions from various factors.

Implications for Related Parties

The results of this study can be taken into consideration for various parties, such as:

*KAP: KAP needs to pay attention to the influence of the audit term of office on the quality of the audit. *Users of Financial Statements: Users of Financial Statements need to understand that the size of the KAP does not guarantee the quality of the audit. *Capital Market Supervisory Agency: The results of this study can help in increasing the effectiveness of supervision of audit quality in Indonesia.

Limitations

This study has several limitations, including:

Limited research period: This research only covers the 2010-2012 period, so that the findings may be irrelevant for the next period. *Audit Quality Measurement Model: Audit quality measurement model used in this study may not include all important aspects of audit quality assessment.

Conclusion

This study made an important contribution in understanding the factors that influence audit quality in banking companies in Indonesia. The findings of this study provide a complex picture of the factors that influence audit quality, and the results suggest that the size of the KAP, audit term, company size, and company leverage jointly have a significant effect on audit quality. The study also found that the term of audit office has a negative effect on audit quality, and the size of the KAP does not guarantee a higher audit quality.
Frequently Asked Questions (FAQs) on Audit Quality in Banking Companies Listed on the Indonesia Stock Exchange

Introduction

Audit quality is a crucial aspect in the financial world, and understanding the factors that influence it is essential for maintaining public trust in companies. In our previous article, we discussed the analysis of factors affecting audit quality in banking companies listed on the Indonesia Stock Exchange (IDX). In this article, we will address some frequently asked questions (FAQs) related to audit quality in banking companies.

Q1: What is audit quality, and why is it important?

A1: Audit quality refers to the ability of an auditor to provide an accurate and unbiased opinion on a company's financial statements. It is essential for maintaining public trust in companies and ensuring that investors, creditors, and other related parties have access to reliable financial information.

Q2: What are the factors that influence audit quality?

A2: The factors that influence audit quality include:

Size of the Public Accountant Firm (KAP): The size of the KAP can affect the quality of the audit, as larger KAPs may have more resources and expertise.
Audit Term (Audit Tenure): The length of time a KAP audits a company can affect the quality of the audit, as longer audit terms may lead to a loss of objectivity and independence.
Company Size (Client Firm Size): The size of the company can affect the quality of the audit, as larger companies may require more complex and detailed audits.
Corporate Leverage (Client Firm Leverage): The company's leverage can affect the quality of the audit, as companies with high leverage may require more detailed and complex audits.

Q3: What is the relationship between KAP size and audit quality?

A3: The study found that KAP size does not have a significant effect on audit quality, with the direction of negative influence. This indicates that the large KAP size does not guarantee a higher audit quality.

Q4: What is the relationship between audit term and audit quality?

A4: The study found that the term of audit office has a significant effect on audit quality, with the direction of negative influence. This indicates that the longer the KAP audits the company, audit quality tends to decrease.

Q5: What is the role of company size and leverage in audit quality?

A5: The study found that company size and leverage do not have a significant effect on audit quality, with the direction of negative influence. This indicates that the size of the company and leverage do not guarantee a higher audit quality.

Q6: What are the implications of the study's findings for related parties?

A6: The study's findings have implications for various parties, including:

KAP: KAP needs to pay attention to the influence of the audit term of office on the quality of the audit.
Users of Financial Statements: Users of Financial Statements need to understand that the size of the KAP does not guarantee the quality of the audit.
Capital Market Supervisory Agency: The results of this study can help in increasing the effectiveness of supervision of audit quality in Indonesia.

Q7: What are the limitations of the study?

A7: The study has several limitations, including:

Limited research period: This research only covers the 2010-2012 period, so that the findings may be irrelevant for the next period.
Audit Quality Measurement Model: Audit quality measurement model used in this study may not include all important aspects of audit quality assessment.

Conclusion

In conclusion, the study's findings provide a complex picture of the factors that influence audit quality in banking companies in Indonesia. The results suggest that the size of the KAP, audit term, company size, and company leverage jointly have a significant effect on audit quality. The study also found that the term of audit office has a negative effect on audit quality, and the size of the KAP does not guarantee a higher audit quality.