The effect of audit fee, audit tenure, and KAP size on audit quality

Abstract

Purpose: This study aims to provide empirical evidence on the effect of audit fee, audit tenure, and KAP size on audit quality in manufacturing companies in the consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) 2016-2019 period.

Methods: This study applies an associative causal analysis research strategy with logistic regression using SPSS 26, focusing on manufacturing companies in the consumer goods sector listed on the IDX between 2016 and 2019. The sample was taken purposively, consisting of 15 companies, with data collected through documentation from the IDX website, company websites, and registered public accountant data.

Findings: The study shows that higher audit fees improve audit quality in consumer goods manufacturing companies listed on the Indonesia Stock Exchange (2016-2019). Meanwhile, audit tenure and KAP size do not have a significant effect, so only audit fees contribute to improving audit quality.

Practical Implications: Research shows that companies need to increase their budget for audit fees to improve audit quality and credibility of financial statements. In addition, the absence of influence from the duration of the auditor's assignment or the size of the accounting firm provides flexibility in selecting auditors, with an emphasis on audit quality. This strategy can help companies produce more accurate and reliable financial statements.