The Effect Of Company Size, Audit Characteristics And Type Of Audit Opinion On Audit Costs In Manufacturing Companies Listed On The Indonesia Stock Exchange For The Period 2011-2014

The Effect of Company Size, Audit Characteristics, and Type of Audit Opinion on Audit Costs in Manufacturing Companies Listed on the Indonesia Stock Exchange for the Period 2011-2014

Introduction

In the business world, audit costs have become an essential aspect that must be considered by companies, especially those registered on the Indonesia Stock Exchange. The audit process is a crucial step in ensuring the accuracy and reliability of a company's financial statements. However, the costs associated with audits can be significant, and understanding the factors that influence these costs is essential for companies to make informed decisions. This study aims to explore the effect of company size, audit characteristics, and type of audit opinion on audit costs incurred by manufacturing companies listed on the Indonesia Stock Exchange between 2011 and 2014.

Research Background

The Indonesia Stock Exchange (IDX) is the primary stock exchange in Indonesia, and it plays a vital role in the country's financial system. The IDX has a listing requirement that companies must undergo an audit process to ensure the accuracy and reliability of their financial statements. The audit process involves a thorough examination of a company's financial statements, and it is conducted by independent auditors who are registered with the IDX. The costs associated with audits can be significant, and understanding the factors that influence these costs is essential for companies to make informed decisions.

Methodology

This study employed a descriptive quantitative analysis with multiple linear regression approaches to analyze the data. The data was collected through two stages: a literature study and a documentation study. The literature study involved collecting data from various sources such as journals, theses, and books that are relevant to the research topic. The documentation study involved collecting data in the form of audited financial statements, annual reports, and auditor reports obtained through the official website of the IDX (www.idx.co.id).

Research Results

The results of this study showed that simultaneously, company size, audit characteristics, and types of audit opinion have a significant influence on audit costs. However, when viewed from partial testing, only company size and audit characteristics have a significant effect on audit costs. Meanwhile, the type of audit opinion apparently does not have a significant impact on audit costs.

Additional Analysis and Explanation

The size of the company is one of the main factors that affect audit costs. Larger companies tend to have higher audit costs because of the complexity in financial statements and more transaction volumes. This makes the auditor need more time and resources to conduct a thorough audit. The complexity of financial statements and the volume of transactions are directly related to the size of the company. Therefore, it is not surprising that larger companies have higher audit costs.

Audit characteristics also play an important role in determining audit costs. Auditors with good or classified reputation, such as the 'big four', will usually charge higher costs. The quality and experience of the auditor greatly affect the audit results and, in turn, the costs that must be borne by the company. Auditors with good reputation and experience will require more time and resources to conduct a thorough audit, which will result in higher costs.

On the other hand, the findings that the type of audit opinion does not have a significant effect on audit costs may be surprising. This can be caused by the fact that audit opinion, whether without exception, with exceptions, or disclaimer, may not cause big differences in the audit approach and the time needed. Companies with the same audit opinion may have variations in costs based on other factors, such as the size and complexity of the company.

Conclusion

This study provides valuable insights on the factors that affect audit costs in manufacturing companies listed on the Indonesia Stock Exchange. By understanding the effect of company size and audit characteristics, company managers can make better decisions in choosing auditors and planning the audit budget. This study also opens opportunities for further study of other aspects that might affect audit costs, so that it can provide a more comprehensive picture in the future.

Recommendations

Based on the findings of this study, the following recommendations are made:

1. Company managers should consider the size of the company when choosing auditors: Larger companies should choose auditors who have experience in auditing complex financial statements and have a good reputation.
2. Company managers should consider the audit characteristics when choosing auditors: Auditors with good reputation and experience should be chosen to ensure that the audit is conducted thoroughly and efficiently.
3. Further study should be conducted to explore other aspects that might affect audit costs: Other factors that might affect audit costs, such as the industry of the company, the location of the company, and the type of audit opinion, should be explored in further studies.

Limitations of the Study

This study has several limitations. Firstly, the study only focused on manufacturing companies listed on the Indonesia Stock Exchange, and the findings may not be generalizable to other industries or companies. Secondly, the study only analyzed the data for the period 2011-2014, and the findings may not be representative of the current situation. Finally, the study only considered the effect of company size, audit characteristics, and type of audit opinion on audit costs, and other factors that might affect audit costs were not considered.

Future Research Directions

This study opens opportunities for further study of other aspects that might affect audit costs. Some potential future research directions include:

1. Exploring the effect of industry on audit costs: The study could explore the effect of industry on audit costs, and whether companies in different industries have different audit costs.
2. Exploring the effect of location on audit costs: The study could explore the effect of location on audit costs, and whether companies located in different regions have different audit costs.
3. Exploring the effect of type of audit opinion on audit costs: The study could explore the effect of type of audit opinion on audit costs, and whether companies with different types of audit opinions have different audit costs.

By exploring these research directions, further insights can be gained on the factors that affect audit costs, and companies can make more informed decisions in choosing auditors and planning the audit budget.
Frequently Asked Questions (FAQs) about the Effect of Company Size, Audit Characteristics, and Type of Audit Opinion on Audit Costs

Q: What is the main objective of this study?

A: The main objective of this study is to explore the effect of company size, audit characteristics, and type of audit opinion on audit costs incurred by manufacturing companies listed on the Indonesia Stock Exchange between 2011 and 2014.

Q: What are the key findings of this study?

A: The key findings of this study are that company size and audit characteristics have a significant effect on audit costs, while the type of audit opinion does not have a significant impact on audit costs.

Q: What are the implications of this study for company managers?

A: The implications of this study for company managers are that they should consider the size of the company and the audit characteristics when choosing auditors and planning the audit budget.

Q: What are the limitations of this study?

A: The limitations of this study are that it only focused on manufacturing companies listed on the Indonesia Stock Exchange, and the findings may not be generalizable to other industries or companies. Additionally, the study only analyzed the data for the period 2011-2014, and the findings may not be representative of the current situation.

Q: What are the future research directions suggested by this study?

A: The future research directions suggested by this study are to explore the effect of industry on audit costs, the effect of location on audit costs, and the effect of type of audit opinion on audit costs.

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

A: The practical implications of this study for auditors are that they should consider the size of the company and the audit characteristics when conducting audits, and that they should be aware of the potential impact of these factors on audit costs.

Q: What are the implications of this study for regulatory bodies?

A: The implications of this study for regulatory bodies are that they should consider the factors that affect audit costs when setting audit standards and regulations.

Q: What are the implications of this study for investors?

A: The implications of this study for investors are that they should consider the factors that affect audit costs when making investment decisions, and that they should be aware of the potential impact of these factors on the accuracy and reliability of financial statements.

Q: What are the implications of this study for the Indonesia Stock Exchange?

A: The implications of this study for the Indonesia Stock Exchange are that it should consider the factors that affect audit costs when setting listing requirements and regulations, and that it should be aware of the potential impact of these factors on the accuracy and reliability of financial statements.

Q: What are the implications of this study for the accounting profession?

A: The implications of this study for the accounting profession are that it should consider the factors that affect audit costs when setting audit standards and regulations, and that it should be aware of the potential impact of these factors on the accuracy and reliability of financial statements.

Q: What are the implications of this study for the business community?

A: The implications of this study for the business community are that it should consider the factors that affect audit costs when making business decisions, and that it should be aware of the potential impact of these factors on the accuracy and reliability of financial statements.