Fitriany, Sidharta Utama, Dwi Martani dan Hilda Rossieta
Abstract
In Indonesia, rotation is not only applied to auditor but also to audit firm. This regulation creates quasi (unreal) rotation). This research purposes to examine whether there are any differences on audit quality between real and quasi audit firm rotation. This study will also examine whether the audit firm rotation from the big accounting firm to a non big accounting firm (or vice versa) will produce a different quality of audit. this paper will contribute to the country that will implement the rule of audit firm rotation, as the green paper stated that mandatory rotation of audit firms – not just of audit partners – should be considered. The audit quality is measured by earning quality (predictive value, timeliness, representational faithfulness and neutrality perspective). The sample data are taken from the public listed companies, from 1999-2001 (before the regulation) to 2004-2008 (after the regulation).
This research found that many audit firm use quasi rotation, but generally no evidences showing the difference of audit quality between real and quasi audit firm rotation. The rotation regulation has not given any impact to audit quality. Hence, it is necessary to consider other regulation to improve audit quality. In the pre regulation period, audit quality from predictability perspective of a company doing rotation from no Bid-4 firm to Big-4 firm is higher than a company doing rotation from non Big-4 to non Big-4 firm. On the other hand, the audit quality from timeliness perspective of a company doing rotation from non Big-4 to Big-4 is lower that company doing rotation from non Big-4 firm to non Big-4 firm. In the post-regulation period, this research proved that there are no differences in the audit quality between Big-4 and Non Big-4 related to the timeliness perspective. Nevertheless, there is still a difference in predictability perspective which Big-4 has higher quality.
Keywords: Audit Quality, real Audit Firm Rotation, Quasi Audit Firm Rotation.
Dipresentasikan pada The 12th Annual Conference and Doctoral Colloquium, Bali, 8 – 12 Oktober 2011, ISBN: 978-602-97982-1-0, Penyelenggara: Asian Academic Accounting Association. The Impact Audit Firm…