The Auditor Tenure And The Qualiqv Of Audit: Mandatory Audit Firm Rotation And Audit Quality Evidence From The Manufacturing Firms Listed In Indonesia Stock Exchange (IDX)

N, Sylfiandy (2009) The Auditor Tenure And The Qualiqv Of Audit: Mandatory Audit Firm Rotation And Audit Quality Evidence From The Manufacturing Firms Listed In Indonesia Stock Exchange (IDX). Other thesis, Fakultas Ekonomi.

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Abstract

This study assesses whether mandatory audit firm rotation effect audit quality. Audit firm rotation reflects by the auditor tenure and quality of audit by quality of earning. Quality of earnings reflects by discretionary accrual, based on previous research that uses accruals to proxy for the quality of earnings. Further, if audit quality is thought of as constraining extreme management decisions in the reporting of financial performance, these results suggest that mandatory rotation may lead to lower audit quality. In this research the value of discretionary accruals are divided into three, absolute, negative, and positive discretionary accruals. Negative discretionar-v accruals show a positive relationship with Auditor Tenure and the rest of variables. Which mean auditee more conservative with the auditors that have been long relationship with them. Auditees tend to be more careful and choose to decrease their income that result in negative discretionary accruals. Positive discretionary accrual shows negative relationship with absolute value of Discretionary accruals. It means that the longer auditor tenure the lower positive discretionary accruals. In sum, there is negative relationship between Absolute Discretionary Accruals and Auditor Tenure. It means that the higher number the companies retained the same auditor (longer tenure) the lower the value of absolute discretionary accruals. The lower value of Absolute discretionary accruals reflects the higher earning quality. Or with simple conclusion, audit quality is increase as the auditor tenure increase. Keywords: auditor tenure, earnings quality, audit quatlity, mandatory rotation

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