Effect Of Switching Auditors, Audit Tenure, Profitability, CAP Reputation, And Company Size Of Audit Report Lag With The Audit Committee As A Moderating Variable In Manufacturing Companies Listed On The Indonesia Stock Exchange For The 2015-2018 Period

Feb 27, 2025 by ADMIN 253 views

Effect of Switching Auditors, Audit Tenure, Profitability, CAP Reputation, and Company Size of Audit Report Lags in Manufacturing Companies: The Role of the Audit Committee

Introduction

The audit report lag, which refers to the time it takes for an audit report to be issued after the financial year-end, is a critical issue in the auditing process. It can have significant implications for investors, regulators, and companies, as it can affect the transparency and accountability of financial reporting. This study aims to investigate the effect of various factors on the delay of audit reports in manufacturing companies listed on the Indonesia Stock Exchange for the 2015-2018 period. The factors studied include the change of auditor (auditor switching), the term of office of the audit (audit tenure), profitability, reputation of the Public Accountant Firm (KAP), and company size. In addition, this research also tests the role of the audit committee as a moderating variable in the relationship.

Background

The audit report lag has been a persistent issue in the auditing process, and it can be influenced by various factors. The change of auditor, for instance, can lead to a delay in the audit report due to the need for the new auditor to familiarize themselves with the company's financial statements and internal controls. The term of office of the audit can also affect the delay, as a longer audit tenure may lead to a more thorough and detailed audit process. Profitability and reputation of KAP can also influence the delay, as companies with higher profitability and KAP with good reputation may have a more efficient and faster audit process. Company size can also be a factor, as larger companies may have more complex financial statements and internal controls, leading to a longer audit process.

Methodology

This study uses data from 167 manufacturing companies listed on the Indonesia Stock Exchange. The sampling technique using the purposive sampling method, produced 70 sample companies for 4 years of observation (2015-2018) with a total of 280 observations. Data analysis was carried out using descriptive statistics, multiple linear regression, and moderation regression analysis with the residual test method.

Results

The results of the study show that:

The change of auditor, the term of office of the auditor, and company size do not significantly affect the delay in the audit report.
Profitability and reputation of KAP have a negative and significant influence on the delay in the audit report. That is, the higher the profitability and reputation of the KAP, the faster the audit report is issued.
Auditor changes, auditor's term of office, profitability, KAP's reputation, and company size jointly have a significant effect on the delay in audit reports.

It is important to note that the Audit Committee ** cannot moderate ** the relationship between the factors studied and the delay in the audit report. This shows that the audit committee, although it plays an important role in the audit process, cannot fully overcome the factors that affect the speed of the issuance of the audit report.

Further Analysis

The results of this study provide some important implications:

Auditor change and the term of the auditor's office apparently did not significantly affect the delay in the audit report. This may be caused by several factors, such as the process of changing auditors that have been structured, or other factors that are more dominant in determining the speed of issuing audit reports.
PROFITABILITY and CAP's reputation shows negative and significant effects on the delay in audit reports. Companies that are more profitable and KAP that have a good reputation tend to have a more efficient and faster audit process.
Company size also does not have a significant effect, which might indicate that the complexity of the company's operations is not always directly proportional to the time needed to complete the audit.

Suggestion

This research has several suggestions for further research:

Further research can be done by considering other factors that might affect the delay in audit reports, such as the level of complexity of financial statements, Quality of Internal Control, and Availability of audit information.
Research can also be done using data from a longer period and by expanding the scope of samples, for example by including companies in other sectors besides manufacturing.
Researchers can consider using other analytical methods, such as Qualitative analysis, to get a deeper understanding of the factors that influence the delay of audit reports.

Conclusion

This study concluded that the profitability and reputation of KAP had a significant influence on the delay of audit reports in manufacturing companies listed on the Indonesia Stock Exchange. The Audit Committee, despite having an important role in the audit process, cannot fully moderate the relationship between the factors studied with delays in the audit report.

The results of this study can be useful for investors, regulators, and companies in understanding the factors that influence the speed of issuance of audit reports and in taking appropriate steps to increase company transparency and accountability.

Implications

The findings of this study have several implications for investors, regulators, and companies:

Investors can use the results of this study to make informed decisions about investing in companies with high profitability and good reputation of KAP.
Regulators can use the results of this study to develop policies and regulations that promote transparency and accountability in financial reporting.
Companies can use the results of this study to identify areas for improvement in their audit process and to take steps to increase transparency and accountability.

Limitations

This study has several limitations:

The study only considered manufacturing companies listed on the Indonesia Stock Exchange, and the results may not be generalizable to other sectors or countries.
The study only used data from 2015-2018, and the results may not be representative of other periods.
The study only used quantitative methods, and the results may not provide a complete understanding of the factors that influence the delay of audit reports.

Future Research

This study suggests several areas for future research:

Further research can be done by considering other factors that might affect the delay in audit reports, such as the level of complexity of financial statements, Quality of Internal Control, and Availability of audit information.
Research can also be done using data from a longer period and by expanding the scope of samples, for example by including companies in other sectors besides manufacturing.
Researchers can consider using other analytical methods, such as Qualitative analysis, to get a deeper understanding of the factors that influence the delay of audit reports.
Q&A: Effect of Switching Auditors, Audit Tenure, Profitability, CAP Reputation, and Company Size of Audit Report Lags in Manufacturing Companies

Q: What is the audit report lag, and why is it important?

A: The audit report lag refers to the time it takes for an audit report to be issued after the financial year-end. It is an important issue in the auditing process because it can affect the transparency and accountability of financial reporting. A longer audit report lag can lead to delayed financial reporting, which can have significant implications for investors, regulators, and companies.

Q: What factors were studied in this research?

A: The factors studied in this research include the change of auditor (auditor switching), the term of office of the audit (audit tenure), profitability, reputation of the Public Accountant Firm (KAP), and company size.

Q: What were the results of the study?

A: The results of the study show that:

The change of auditor, the term of office of the auditor, and company size do not significantly affect the delay in the audit report.
Profitability and reputation of KAP have a negative and significant influence on the delay in the audit report. That is, the higher the profitability and reputation of the KAP, the faster the audit report is issued.
Auditor changes, auditor's term of office, profitability, KAP's reputation, and company size jointly have a significant effect on the delay in audit reports.

Q: What role does the audit committee play in the audit process?

A: The audit committee plays an important role in the audit process, but it cannot fully moderate the relationship between the factors studied and the delay in the audit report. This means that the audit committee, despite its importance, cannot fully overcome the factors that affect the speed of the issuance of the audit report.

Q: What are the implications of this study for investors, regulators, and companies?

A: The findings of this study have several implications for investors, regulators, and companies:

Investors can use the results of this study to make informed decisions about investing in companies with high profitability and good reputation of KAP.
Regulators can use the results of this study to develop policies and regulations that promote transparency and accountability in financial reporting.
Companies can use the results of this study to identify areas for improvement in their audit process and to take steps to increase transparency and accountability.

Q: What are the limitations of this study?

A: This study has several limitations:

The study only considered manufacturing companies listed on the Indonesia Stock Exchange, and the results may not be generalizable to other sectors or countries.
The study only used data from 2015-2018, and the results may not be representative of other periods.
The study only used quantitative methods, and the results may not provide a complete understanding of the factors that influence the delay of audit reports.

Q: What are the suggestions for further research?

A: This research has several suggestions for further research:

Further research can be done by considering other factors that might affect the delay in audit reports, such as the level of complexity of financial statements, Quality of Internal Control, and Availability of audit information.
Research can also be done using data from a longer period and by expanding the scope of samples, for example by including companies in other sectors besides manufacturing.
Researchers can consider using other analytical methods, such as Qualitative analysis, to get a deeper understanding of the factors that influence the delay of audit reports.

Q: What are the practical implications of this study for companies?

A: The practical implications of this study for companies are:

Companies can use the results of this study to identify areas for improvement in their audit process and to take steps to increase transparency and accountability.
Companies can also use the results of this study to develop strategies to reduce the delay in audit reports, such as improving the quality of financial statements and internal controls.

Q: What are the future research directions?

A: The future research directions are:

Further research can be done by considering other factors that might affect the delay in audit reports, such as the level of complexity of financial statements, Quality of Internal Control, and Availability of audit information.
Research can also be done using data from a longer period and by expanding the scope of samples, for example by including companies in other sectors besides manufacturing.
Researchers can consider using other analytical methods, such as Qualitative analysis, to get a deeper understanding of the factors that influence the delay of audit reports.