Analysis of Mandatory Audit Rotation Regulations in Indonesia
- DOI
- 10.2991/apbec-18.2019.65How to use a DOI?
- Keywords
- Audit quality, Audit Partner Rotation, Audit Firm Rotation, Audit Tenure, Specialization, CPE, Workload, Audit Committee
- Abstract
This research investigates the impact on audit quality on the regulation requiring mandatory audit rotation in Indonesia. Only a few countries have enacted such a rule about mandatory audit firm rotation. To determine this rule’s impact, a sample of company listed on the Indonesian stock exchange, before the regulation (1999–2001) and after the regulation (2004–2008) were analyzed. The study found that before the regulatory period, the relationship between tenure and audit quality was concave (increasing up to 3 years and then declining), but after the regulation, the relationship became convex (decrease in the first 2 years, then rising). After the regulation, the rotation of audit partners increased audit quality, but audit firm rotation did not impact audit quality. Auditor specialization will increase audit quality, but auditor workload and Continuing Professional Education (CPE) will decrease audit quality. The audit committee was not found to have a direct impact on audit quality, nor does it moderate the relationship between the aforementioned variables and audit quality, except for the variable workload. The implication of this research is that mandatory audit firm rotation needs to be evaluated again because the regulation is impairing audit quality, whereas the regulation concerning audit partner rotation needs to be maintained, because it has improved audit quality. The role of the audit committee should be further enhanced.
- Copyright
- © 2019, the Authors. Published by Atlantis Press.
- Open Access
- This is an open access article distributed under the CC BY-NC license (http://creativecommons.org/licenses/by-nc/4.0/).
Cite this article
TY - CONF AU - Fitriany Fitriany AU - Sidharta Utama AU - Hilda Rossieta AU - Dwi Martani PY - 2019/07 DA - 2019/07 TI - Analysis of Mandatory Audit Rotation Regulations in Indonesia BT - Proceedings of the Asia Pacific Business and Economics Conference (APBEC 2018) PB - Atlantis Press SP - 460 EP - 471 SN - 2352-5428 UR - https://doi.org/10.2991/apbec-18.2019.65 DO - 10.2991/apbec-18.2019.65 ID - Fitriany2019/07 ER -