Does Auditor Tenure Reduce Audit Quality?

  • Junaidi Junaidi Universitas Teknologi Yogyakarta
  • Setiyono Miharjo Universitas Gadjah Mada
  • Bambang Hartadi Universitas Teknologi Yogyakarta
Keywords: auditor, audit quality, accounting

Abstract

Reduced auditor independence and the rise of corporate accounting manipulations have caused trust of the users in audited financial statements to begin to decline, so users of financial statements are questioning whether public accountants are independent parties. This research issue is related to the Decree of the Minister of Finance No. 17 in 2008 about public accountant services. Giving attestation services, in the form of financial statements about an entity, are conducted by the audit firm for no longer than 6 consecutive fiscal years and by a public accountant for 3 consecutive fiscal years at the longest. The purpose of this research is to examine empirically the influence of auditor tenure on audit quality. Auditor tenure is measured as the length of the auditor-client relationship. Audit quality is measured by the propensity of auditors to issue a going-concern opinion. This study uses a sample of firms listed on the Indonesia Stock Exchange during the 2003-2008 period. Research analysis uses logit model to measure the effect of auditor tenure on the auditors’ propensity to publish a going-concern opinion. The hypothesis which states that the length of auditor tenure influences negatively the propensity of auditors to issue a going-concern opinion is statistically supported. This research is expected to provide empirical evidence about the importance of limiting of the auditor-client relationship.

Author Biographies

Junaidi Junaidi, Universitas Teknologi Yogyakarta

JUNAIDI is a lecturer at Faculty of Informatics Technology and Business, Universitas Teknologi Yogyakarta. Currently, he is a doctorate student at Program Doktor Akuntansi, Universitas Gadjah Mada. He got his M.Si. (2004) from Universitas Gadjah Mada and his Bachelor Degree (1998) from Universitas Teknologi Yogyakarta. His research interests include Financial Report Analysis and Auditing.
    Author contact’s details:  Faculty of Informatics Technology and Business, Universitas Teknologi Yogyakarta, Jl. Glagahsari No. 6,Yogyakarta, Indonesia; Phone: (0274) 373955 Fx. (0274) 381212, Mobile: 08122721026; e-mail: masjoen@yahoo.com, and masjun.junaidi@gmail.com. 

Setiyono Miharjo, Universitas Gadjah Mada

MIHARJO, Setiyono is a lecturer at Department of Accounting, Faculty of Economics and Business, Universitas Gadjah Mada. He earned his Ph.D. from The Fox School of Business, Temple University, Philadelphia (2007), his M.B.A. from Haworth College of Business, Western Michigan University (1994), and his Bachelor Degree from Faculty of Economics, Universitas Gadjah Mada (1990). His main areas of research include Financial Accounting, Managerial Accounting, and Taxation.
    Author contact’s details: Faculty of Economics and Business of Universitas Gadjah Mada, Yogyakarta, Indonesia. Phone: +62 274 548510; e-mail: johnset@gmail.com.

Bambang Hartadi, Universitas Teknologi Yogyakarta

HARTADI, Bambang is a lecturer at Faculty of Informatics Technology and Business UTY (FITB-UTY). He received his Ph.D. (2006) from School of Management USM Malaysia. He took his Master of Management (1996) on Marketing and Accounting Management in Universitas Gadjah Mada. He took his undergraduate program (1982) from Faculty of Economics, Universitas Gadjah Mada. Currently, he is the rector of Universitas Teknologi Yogyakarta.
   Author contact’s details:  Faculty of Informatics Technology and Business, Universitas Teknologi Yogyakarta, Jl. Glagahsari 63, Yogyakarta, Indonesia; e-mail: bhartadi@yahoo.com.

References

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Published
2012-09-12
How to Cite
Junaidi, J., Miharjo, S., & Hartadi, B. (2012). Does Auditor Tenure Reduce Audit Quality?. Gadjah Mada International Journal of Business, 14(3), 303-315. Retrieved from https://dev.journal.ugm.ac.id/v3/gamaijb/article/view/15373

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