Dr. Dwi Martani

Universitas Indonesia – Fakultas Ekonomi dan Bisnis – Ilmu Akuntansi

Fitriany, Sidharta Utama, Dwi Martani, Hilda Rossieta


Regulation about audit rotation in Indonesia is not only to regulate the rotation of audit partners, but also the rotation of audit firm. Regulation of audit firm in Indonesia creates quasi (unreal) rotation. This study aims to investigate whether the audit firm rotation regulation is required to increase audit quality because at present, many countries no longer apply the audit firm rotation. This study also examine whether the audit tenure and specialization affect the audit quality. The data samples used, are public companies listed on the period before (1999-2001) and after (2004-2008) the adoption of audit rotation regulation.

This research finds the quadratic relationship between tenure and audit quality, (not merely linear relationship as noted in previous research). Audit firm tenure at pre-regulationis negatively related to audit quality, but at post regulation convexly related to the audit quality (going down until 10 years and then going up). Audit firm rotation at the pre-regulation will decrease the audit quality, but after regulation doesn’t affect the audit quality. Audit partner tenure at the pre-regulation concavely related to audit quality (going up until 3 years and then going down) while in the post-regulation, the relationship is convex (going down in the first 2 years and then going up). At pre and post-regulation period, audit partner rotation positively affects the audit quality. There is no the differences in audit quality between company doing real and quasi rotation. Based on these findings, we can concluded that the rotation regulation has not made any impact to audit quality. Hence, it is necessary to consider other regulation to improve audit quality.

These results indicate that audit firm rotation does not improve audit quality, so it should be considered stopped while audit partner rotation is still needed.

Keywords: Audit Quality, Real Audit Rotation, Quasi Audit Rotation, Audit Tenure

Dipresentasikan pada The 2nd TJAR (The Japanese Accounting Review) Conference, Kobe University, Japan, 23 Desember 2011, penyelenggara TJAR. Do Mandatory Audit Firm…