Effect of Financial Difficulties

Oct 13, 2025 by talynt.org 60 views

The Effect of Audit Opinion, Audit Fee, Financial Distress, KAP Size and Company Growth on the Change of Public Accounting Firm (Audit Switching) in Manufacturing Companies Listed on the Indonesia Stock Exchange (IDX) for the 2013-2015 Period

Introduction

The change of public accounting firm (KAP) is a common phenomenon in the auditing industry, particularly in manufacturing companies listed on the Indonesia Stock Exchange (IDX). This study aims to investigate the effect of audit opinion, audit fee, financial distress, KAP size, and company growth on the change of KAP in manufacturing companies listed on the IDX for the 2013-2015 period. The study uses a sample of 27 manufacturing companies listed on the IDX, with a total of 81 units of analysis or observation.

Background

Previous research on the change of KAP has yielded various results, with some studies finding that audit opinion, audit fee, financial distress, KAP size, and company growth have a significant effect on the change of KAP, while others have found no significant effect. Therefore, this study aims to verify the theory of the replacement of KAP by reviewing the influence of various factors mentioned above.

Methodology

The population of this study is 140 manufacturing companies listed on the IDX. The sampling method used was purposive sampling, resulting in 27 company samples for 3 years (2013-2015), which produced 81 units of analysis or observation. The research data was collected from the Indonesia Stock Exchange website. The data analysis technique used is descriptive statistics and logistic regression. Data analysis begins with descriptive statistical analysis, followed by testing classic assumptions, and finally hypothesis analysis. The research model meets the classic assumptions.

Results

The results of this study show that audit opinion, KAP size, and growth rate have no significant effect on the replacement of the KAP. However, audit costs and financial difficulties have a positive and significant effect on the replacement of the KAP. Furthermore, the results indicate that audit opinion, audit costs, financial difficulties, KAP size, and growth rates have a significant effect on the replacement of the KAP.

Further Analysis

The Effect of Audit Costs

The results of this study indicate that higher audit costs correlate with an increase in the possibility of KAP change. This may be caused by companies looking for KAP with lower audit fees to reduce expenses. The company may also feel that high audit costs are not comparable to the quality of the audit provided by the KAP.

Effect of Financial Difficulties

Companies that have financial difficulties tend to change KAP more often. This may be caused by the company's need to find KAP that can help them in overcoming financial difficulties. The new KAP may have better experience and expertise in handling companies that experience financial difficulties.

The Role of Audit Opinion, KAP Size, and Growth Rate

The results of this study indicate that audit opinion, KAP size, and growth rate do not significantly affect the replacement of the KAP. This may be caused by other factors that are more dominant in influencing the decision of the KAP change.

Implications for Companies and KAP

Company

The company needs to consider audit costs and financial difficulties in choosing KAP. The company also needs to understand that audit opinion, KAP size, and growth rate may not be a major factor in the decision of the KAP replacement.

KAP

KAP needs to offer high-quality audit services at competitive costs to attract and maintain clients. KAP also needs to have expertise in handling companies that experience financial difficulties.

Suggestion

Subsequent research can consider other factors that may affect the replacement of KAP, such as the reputation of the KAP, the experience of the KAP, and the relationship between the KAP and the company's management. Research can also consider a longer time period to get more accurate results.

Conclusion

This study contributes to the existing literature on the change of KAP by investigating the effect of audit opinion, audit fee, financial distress, KAP size, and company growth on the change of KAP in manufacturing companies listed on the IDX for the 2013-2015 period. The results of this study provide insights into the factors that influence the replacement of KAP and have implications for companies and KAP.
Frequently Asked Questions (FAQs) about the Effect of Audit Opinion, Audit Fee, Financial Distress, KAP Size and Company Growth on the Change of Public Accounting Firm (Audit Switching) in Manufacturing Companies Listed on the Indonesia Stock Exchange (IDX)

Q: What is the main objective of this study?

A: The main objective of this study is to investigate the effect of audit opinion, audit fee, financial distress, KAP size, and company growth on the change of public accounting firm (KAP) in manufacturing companies listed on the Indonesia Stock Exchange (IDX) for the 2013-2015 period.

Q: What is the population of this study?

A: The population of this study is 140 manufacturing companies listed on the IDX.

Q: What is the sampling method used in this study?

A: The sampling method used in this study is purposive sampling, which resulted in 27 company samples for 3 years (2013-2015), producing 81 units of analysis or observation.

Q: What is the data analysis technique used in this study?

A: The data analysis technique used in this study is descriptive statistics and logistic regression.

Q: What are the results of this study?

A: The results of this study show that audit opinion, KAP size, and growth rate have no significant effect on the replacement of the KAP. However, audit costs and financial difficulties have a positive and significant effect on the replacement of the KAP.

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

A: The implications of this study for companies and KAP are that companies need to consider audit costs and financial difficulties in choosing KAP, and KAP needs to offer high-quality audit services at competitive costs to attract and maintain clients.

Q: What are the limitations of this study?

A: The limitations of this study are that it only considers a specific time period (2013-2015) and a specific population (manufacturing companies listed on the IDX). Future studies can consider other factors that may affect the replacement of KAP and a longer time period to get more accurate results.

Q: What are the suggestions for future research?

A: The suggestions for future research are that subsequent studies can consider other factors that may affect the replacement of KAP, such as the reputation of the KAP, the experience of the KAP, and the relationship between the KAP and the company's management.

Q: What are the contributions of this study to the existing literature?

A: The contributions of this study to the existing literature are that it provides insights into the factors that influence the replacement of KAP and has implications for companies and KAP.

Q: What are the practical implications of this study?

A: The practical implications of this study are that companies and KAP can use the findings of this study to make informed decisions about the replacement of KAP.

Q: What are the future directions for research on the replacement of KAP?

A: The future directions for research on the replacement of KAP are to consider other factors that may affect the replacement of KAP and to conduct studies in other contexts to generalize the findings of this study.