How to cite:

Adri Yeanne Colson Tani, Chandrarin Grahita, Zuhro Diana. (2022).

Effect of Audit Tenure and Auditor Switching on Audit Delay with

Auditor Specialization as Moderating Variable. Journal Eduvest. Vol

2(3): 490-497

E-ISSN:

2775-3727

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Eduvest – Journal of Universal Studies

Volume 2 Number 3, March, 2022

p- ISSN 2775-3735- e-ISSN 2775-3727

EFFECT OF AUDIT TENURE AND AUDITOR SWITCHING

ON AUDIT DELAY WITH AUDITOR SPECIALIZATION AS

MODERATING VARIABLE

Adri Yeanne Colson Tani

, Chandrarin Grahita

, Zuhro Diana

Student in the Master in Accounting Program, University of Merdeka

Malang, Indonesia

2-3

Faculty Economics and Business, University of Merdeka Malang,

Indonesia

Email: [email protected], [email protected],

[email protected]

ARTICLE INFO ABSTRACT

Received:

Ferbuary,

2022

Revised:

March, 15

2022

Approved:

March, 16

2022

The purpose of this study was to determine the effect of audit

tenure and auditor switching on audit delay with auditor

specialization as a moderating variable. This study is a

quantitative study using secondary data with a sample of 23

consumer goods sub-sector companies listed on the Indonesia

Stock Exchange (IDX). The data collection method is done by

accessing the company's financial statements published by the

Indonesia Stock Exchange. The data obtained were then

processed using SPSS. This analysis includes classical

assumption test (data normality test, multicollinearity test and

heteroscedasticity test), statistical test (F test, t test and R2

test) and moderating regression analysis (MRA). Based on the

results of the tests carried out, it shows that the F test of the

multiple linear regression equation model is appropriate (Fit)

that there is a significant effect between audit tenure and

auditor switching on audit delay. While the t test, audit tenure

has no significant effect on audit delay, audit switching has a

significant effect on audit delay, auditor specialization as a

moderating variable cannot moderate or weaken the

relationship between audit tenure and audit switching.

KEYWORDS

Audit Tenure, Auditor Switching, Audit Delay, Spesialisasi

Auditor

Adri Yeanne Colson Tani, Chandrarin Grahita, Zuhro Diana

Effect of Audit Tenure and Auditor Switching on Audit Delay with Auditor

Specialization as Moderating Variable 491

This work is licensed under a Creative Commons Attribution-

ShareAlike 4.0 International

INTRODUCTION

In the last decade, Indonesia's finances have been growing rapidly. This

statement is supported by the increasing number of publicly listed companies on the

Indonesia Stock Exchange (IDX) or the Indonesia Stock Exchange (IDX). This is

evidenced by the increasing number of local companies that are developing and

expanding in order to compete to go public. The rapid growth in the number of

companies listed on the capital market has an impact on increasing demand for audits of

financial statements by independent auditors. Financial statements are the end result of

the accounting process that can be used as a communication tool between business

people. Financial statements contain records of a company's financial information in an

accounting period that can be used to describe the company's performance in that period.

Timeliness in publishing audited financial statements on a regular basis provides relevant

information for users.

Based on the Decree of the Financial Services Authority Regulation Number

29/POJK.04/2016 concerning the Annual Report of Issuers or Public Companies (State

Gazette of the Republic of Indonesia Year 2016 Number 150, Supplement to the State

Gazette of the Republic of Indonesia Number 5911), states that public companies in

Indonesia are required to submit financial reports accompanied by an accountant's report

and submitted to the Financial Services Authority (OJK) and announced to the public no

later than the end of the third month after the end of the financial year

(https://www.ojk.go.id/). The OJK and the Indonesia Stock Exchange (IDX) set quite

strict regulations regarding the quality, quantity, and timeliness of the submission of

financial reports. In compliance with regulations, this audit is also carried out to provide

confidence to shareholders or principals on the financial statements presented by

managers or companies (Tunggal & Lusmeida, 2019).

The auditor as an independent external party is in charge of assessing that the

financial statements have been presented according to reality, without any manipulation,

so that the decisions made by the shareholders are correct and do not harm the investors

themselves. Auditors have a very important role to reduce information risk, this is the

reason why companies need audit services (Soori & Arezoo, 2020). Auditors in carrying

out audits on financial statements must be carried out based on the Professional Standards

of Public Accountants, especially on the third standard of field work regarding the

accuracy and thoroughness of the audit with the collection of adequate evidence. The

obligation to meet this standard results in the time required to complete the audit of

financial statements based on the time it takes the auditor to understand the company in

order to meet the applicable professional standards (RAHAYU, FAKHRURROZI, &

PUTRA, 2018). The time difference between the date of the fiscal financial statements

and the date of the independent auditor's report indicates the length of time the auditor

has completed the audit. This time difference is often called audit delay (Rustiarini,

2013).

Audit delay is the range of time required for the completion of the audit which is

measured from the end date of the fiscal financial statements to the date of the audited

report (Super & Shil, 2019). The longer the auditor completes his audit work, the longer

the audit delay. The auditor must be able to estimate the length of time for completion of

the audit to be able to publish the audit report in a timely manner. Timeliness of the

submission of financial statements is one of the qualitative characteristics of information

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that is useful to support the relevance of information. The main thing that happened was

that the audit delay was caused by an audit process that took time. The audit process that

results in a long audit delay can be caused by events within the company, such as

companies experiencing losses that tend to take longer for the auditor to start the audit

process than usual (Fujianti & Satria, 2020).

A long audit delay will have a negative impact on firm value. Companies that

publish audited financial statements to the market are expected to provide information

that will provide a response as a signal that can have an impact on company value.

Timely presentation of financial statements is also a strategic aspect to gain a competitive

advantage in supporting the success of a company, and build a better corporate image in

the eyes of the public, which is expected to lead to public trust in the quality of

information presented by the company (Christina et al., 2018).

This timeliness is related to signal theory, that companies that publish financial

reports on time are able to give positive signals to the market, so that investors will give a

positive response to the company. If the company's signal informs the good news, it can

increase the company's stock price. Conversely, when the company is late in publishing

financial statements, investors will assume that there is bad news in the company and the

market will give a negative reaction to the company which has an impact on stock prices

(Felia & Kartika, 2020). Based on this phenomenon, to control the market reaction on

firm value, the company is expected to be able to control the occurrence of audit delay.

Audit tenure is indicated as one of the factors that can affect audit delay. Audit

tenure is the length of the engagement period for a public accounting firm (KAP) in

providing audit services to its clients. Audit tenure can increase understanding and

experience in studying company characteristics (Felia & Kartika, 2020). Geiger and

Raghunandan (2002) in their research found that audit failures often occur in the first year

of the engagement between the auditor and the company when establishing a relationship

because it takes a longer time for the auditor to adjust to the company's records,

operational systems, and working papers during the period. then when just bonding with

clients. Rahayu (2012) along with the length of time the auditor conducts an audit of a

particular client, the auditor is able to better understand the condition of the company, the

company's business risks, and the accounting system used by the company, thus being

able to obtain a more effective and efficient audit process. Permata (2013) concluded that

increasing audit tenure has a negative effect on the delivery of financial statement

information or a short audit delay.

In addition to the effect of audit tenure, there are several studies which state that

the occurrence of auditor switching also has an influence on the occurrence of audit

delay. Auditor switching is an action taken by the company where the company

disconnects the old and replaces it with a new auditor (Syakti, Hidayati, & Siregar, 2021).

Changes in auditors are also indicated to cause audit delays. Companies that experience a

change of auditor will auditor appoint a new auditor, where it takes quite a long time for

the new auditor to recognize the characteristics of the client's business and the system in

it (Tambunan, 2018). Auditor switching can cause audit delay because there is a

possibility that the substitute auditor may not be able to complete his audit task on time

(Rustiarini, 2013). Auditor switching has a positive influence on audit delay, this is due to

the fact that the company has not been able to determine a new auditor as a substitute

auditor who is competent and has specialized knowledge in his field based on the needs

of each company, causing the process of completing the audit of financial statements to

be unable. implemented in a timely manner (Rustiarini and Sugiarti, 2013).

Adri Yeanne Colson Tani, Chandrarin Grahita, Zuhro Diana

Effect of Audit Tenure and Auditor Switching on Audit Delay with Auditor

Specialization as Moderating Variable 493

A longer term or tenure and the absence of auditor turnover will provide auditors

with more knowledge about the client's business. This more knowledge will make it

easier for the auditor to prepare the audit program to be carried out so as to speed up the

audit process (Khatana et al., 2019). This condition will be strengthened if a company is

audited by a public accounting firm that has a predicate as an industry specialization.

Sarwoko and Agoes, (2014) specialist auditors are auditors who have received training

and have long experience, most of which concentrate on the client's specific business and

industry, and have in-depth knowledge and understanding of company activities, specific

accounting and auditing guidelines, which are it is important to conduct a high quality

audit. Auditors are categorized as industry specialists if they have many clients in the

same industry (Andreas, Niebuhr, & Ringwald, 2012). Auditors who have many clients in

the same industry have better knowledge and understanding of internal control, business

risk, and audit risk in the industry compared to auditors who do not have specialization

(Setiawan and Fitriany, 2011). Auditors with industry specialization will more quickly

detect errors in their industry specialization than outside the industry (Amoah, Owusu, &

Adjei, 2002). Audits conducted by auditors who have industry specialists tend to be of

higher quality, because the audit team and/or public accounting firms have industry-

specific expertise (Carcello and Nagy, 2002). Industrial specialization auditors have the

ability to detect errors and have better experience than non-specialized industry auditors

(Christiani and Nugrahanti, 2014). Auditor services from KAP with a good reputation can

increase the credibility of financial reports (Aji & Sutikno, 2015). Habib and Bhuiyan

(2011) concluded that an auditor who has the title as an industrial specialization auditor is

able to start the audit process more faster and complete the audit faster when compared to

non-industry-specialized auditors, this is because these auditors have specific skills and

knowledge about an industry that will play a significant role in completing the audit

process. If the auditor has participated and conducted training that focuses on a particular

sub-industry, the auditor is called a specialist in that industry. Industry specialization

auditors are able to understand more specifically in certain industries because they are

obtained from experience or special training in auditing a particular industry so as to

minimize audit delays (Rahadianto, 2012).

The results of the research by Wiguna (2012) show that tenure of KAP has a

significant positive effect on audit delay. Another case in the research of Rustiarini and

Mita (2013) the results of the study show that auditor turnover has a positive effect on

audit delay while the length of time assignment (audit tenure) has no effect on audit

delay. The results of Dewi's research (2014) show that audit tenure has a significant

negative effect on audit delay, where the longer the audit tenure, the auditor can gain

more knowledge and experience in auditing about the characteristics of clients and their

client's business operational systems which can increase audit efficiency. Different results

from research by Rahayu (2012) and Mariani (2015) show that audit tenure has a

significant positive effect on audit delay. The reason is because the independence factor

of the auditor in the auditing process can be reduced. The longer the bond with the client,

the auditor is able to create a more intense closeness with the client. This can provide an

opportunity for the KAP and the auditor to prolong or extend the time in completing the

audit. The research results from Putra and Sukirman (2014) show that auditor switching

has no effect on audit delay. The results are the same as the research by Wiryakriyana and

Widhiyani (2017) which states that auditor switching has no effect on audit delay.

The inconsistency of previous research examining the effect of audit tenure and

auditor switching on audit delay raises the suspicion of moderating variables

(strengthening or weakening) the relationship between these variables. Where in the

research of Ratnaningsih and Dwirandra (2016) found that auditor industry specialization

Eduvest – Journal of Universal Studies

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moderates the effect of auditor turnover on audit delay. Therefore, this study was

conducted to re-examine the variables related to audit tenure and auditor switching on

audit delay, with auditor specialization as a moderating variable. The object of research

used in this study is a manufacturing company in the consumer goods industry sector

listed on the IDX for the 2016-2020 period. The reason the researcher chooses

manufacturing companies in the consumer goods industrial sector as the object of

research is because companies engaged in manufacturing companies in the consumer

goods industry sector are quite attractive to investors because it has been proven through

the resilience of the manufacturing sector, especially supported by the consumer goods

sector, which grew 28%. . This increase is the second highest increase out of 10 existing

sectors. In addition, the consumer goods industry sector can indirectly represent the level

of community consumption. There is also another reason for choosing this sector because

the consumer goods sector companies because sales from this sector are stable and

consumption goods are a basic element of the needs of human life. Stocks from these

issuers will be an option because they still offer upside potential. With stable sales, it will

be easier and more focused to look at the factors that affect audit quality without looking

at other factors such as consumer tastes and substitute goods. Based on the background

and research gap above, the researcher wants to examine the audit delay variable which is

tested for its influence on audit tenure and auditor switching with auditor specialization as

moderating variable.

RESEARCH METHOD

The research data analysis model was carried out using descriptive analysis

techniques, classical assumption tests, F tests, t tests and Moderating Regression Analysis

(MRA). Moderated Regression Analysis (MRA) is an analytical technique that aims to

test the strength of the relationship or the influence of the independent variable on the

dependent variable. The theory that underlies this research is the contingency theory. The

strength of the relationship or the influence of the independent variable on the contingent

dependent variable or depending on the moderating variable. Technically, the MRA stage

is to test the effect of the independent variable on the dependent first and then form a

moderating variable which is then tested for its effect on the dependent variable. The

dependent variable in this study is audit delay. While the independent variables include:

audit tenure and auditor switching with moderating variables of auditor specialization.

Determination of the population in this study, namely manufacturing companies in

the consumer goods industry sector listed on the Indonesia Stock Exchange (IDX) for the

2016-2020 period, amounting to 51 companies. Observation list of manufacturing

companies in the consumer goods industry sector listed on the Indonesia Stock Exchange

(IDX) for the 2016-2020 period. And the sample is the Manufacturing Company of the

Consumer Goods Industry Sector in this study totaling 23 companies.

RESULT AND DISCUSSION

A. Hypothesis Test

First Hypothesis

The effect of audit tenure (X1) on audit delay (Y).

the significance value of audit tenure is 0.085 > 0.05, then Ho is accepted and Ha is

rejected, then the audit tenure variable (X1) does not have a partially significant effect on

audit delay (Y).

Second Hypothesis

Effect of Auditor switching (X2) on audit delay (Y).

Adri Yeanne Colson Tani, Chandrarin Grahita, Zuhro Diana

Effect of Audit Tenure and Auditor Switching on Audit Delay with Auditor

Specialization as Moderating Variable 495

the significance value of auditor switching is 0.010 < 0.05, then Ho is rejected and Ha is

accepted, then the auditor switching variable (X2) has a partially significant effect on

audit delay (Y).

Third Hypothesis

Auditor specialization moderates the effect of audit tenure on audit delay

the moderating significance value of one is 0.133 > 0.05, then Ho is accepted and Ha is

rejected, then the auditor specialization variable cannot moderate the effect of audit

tenure (X1) on audit delay (Y).

Fourth Hypothesis

Auditor specialization moderates the effect of auditor switching on audit delay. the

second moderating significance value is 0.950 > 0.05, then Ho is accepted and Ha is

rejected, then the auditor specialization variable cannot moderate the effect of audit

switching (X2) on audit delay (Y).

B. Discussion of Research Results

1. Effect of Tenure Audit on Audit Delay

The test results prove that there is no effect of audit tenure on audit delay. These

results indicate that the significance of the t-test value of the audit tenure variable is

greater than the alpha value with the coefficient value being negative. This indicates that

audit tenure has no effect on audit delay. From the discussion above, it can be concluded

that the length of the engagement period (audit tenure) is not necessarily a guarantee that

there will be no audit delay. An auditor who has a long assignment with a client company

may not necessarily encourage the creation of good business knowledge. Assignment of

auditors for a long time can actually cause auditors to be less independent and

professional in carrying out their duties. This of course causes the auditor to be unable to

complete his obligations on time, thereby reducing the timely submission of audited

financial statements. The results of this study are consistent with research conducted by

Rustiarini and Sugiarti (2013), Praptika and Rasmini (2016) where audit tenure has a

positive effect on audit delay. However, this result does not agree with research

conducted by Dewi (2014), Ratnaningsih and Dwirandra (2016) which shows that audit

tenure has a negative effect on audit delay.

2. Effect of Auditor Switching on Audit Delay

The test results prove that there is an effect of auditor switching on audit delay.

These results indicate that the significance of the t-test value of the auditor switching

variable is smaller than the alpha value with the coefficient value being positive. This

indicates that auditor switching has an effect on audit delay. Auditor switching is a

behavior carried out by companies to switch auditors either due to existing regulations or

voluntarily. Auditor switching which is mandatory (mandatory) occurs because of

government regulations that have been regulated in the Decree of the Minister of Finance

No. 17/PMK.01/2008 concerning Public Accountant Services. Regulations that limit the

contractual relationship between the auditor and the company as a client. While auditor

switching is voluntary, the main concern is on the client side. When the client changes his

auditor when there are no rules that require it (voluntary), what happens is one of two

things, namely the auditor resigns or the auditor is fired by the client. This study has

consistent results with research conducted by Rustiarini and Sugiarti (2013), Praptika and

Rasmini (2016) where auditor switching has a positive effect on audit delay.

Eduvest – Journal of Universal Studies

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The results of this study have different results from research conducted by Putra

and Sukirman (2014), Wiryakriyana and Widhiyani (2017) showing that auditor

switching has no effect on audit delay.

3. Auditor Specialization Moderates Effect of Audit Tenure on Audit Delay

The third hypothesis states that auditor specialization moderates the negative

effect of audit tenure on audit delay. The significance level of the t test for the moderating

variable of auditor specialization has an effect on the relationship between audit tenure

and audit delay, which is greater than the alpha value with the regression coefficient value

being positive. This proves that auditor specialization cannot moderate the effect of audit

tenure on audit delay. The results of this study agree with research by Rosyidi (2017) and

Rahayu (2012) which show that the results of auditor specialization do not moderate the

relationship between audit tenure and audit delay. Specialized auditors cannot maintain

independence in carrying out audits. Auditors do not use professional skills in carrying

out the audit process due to the personal interest of the client is one of the factors that

prolongs the audit delay. The existence of such personal interests can cause interference

with the independence of the auditor and can justify frauds occurring.

4. Auditor Specialization Moderates Effect of Auditor Switching on Audit Delay

The fourth hypothesis states that auditor specialization moderates the

positive effect of auditor switching on audit delay. The significance level of the t test for

the moderating variable of auditor specialization has an effect on the relationship between

auditor switching on audit delay which is greater than the alpha value with the regression

coefficient value being negative. This proves that auditor specialization cannot moderate

the effect of auditor switching on audit delay. The occurrence of audit delay when an

auditor change is carried out is mostly due to an auditor having to understand the

characteristics of the company before carrying out the audit process. The results show

that not all auditors with specialization predicate are able to detect material misstatements

in the financial statements better and are not able to create an effective audit process. The

results of this study are inconsistent with research conducted by Ratnaningsih and

Dwirandra (2016) which showed that auditor specialization was able to moderate the

effect of auditor switching on audit delay.

CONCLUSION

Based on the results of the research and discussion conducted, the following

conclusions can be drawn: Audit tenure does not partially affect audit delay in consumer

goods manufacturing sub-sector companies listed on the Indonesia Stock Exchange. With

these results, the first hypothesis is rejected. Auditor switching partially affects audit

delay in consumer goods manufacturing sub-sector companies listed on the Indonesia

Stock Exchange. With these results, the second hypothesis is accepted. Auditor

specialization partially cannot moderate the effect of audit tenure on audit delay in

consumer goods sub-sector manufacturing companies listed on the Indonesia Stock

Exchange. With these results, the third hypothesis is rejected. Auditor specialization

partially cannot moderate the effect of auditor switching on audit delay in consumer

goods sub-sector manufacturing companies listed on the Indonesia Stock Exchange. With

these results, the fourth hypothesis is rejected.

Adri Yeanne Colson Tani, Chandrarin Grahita, Zuhro Diana

Effect of Audit Tenure and Auditor Switching on Audit Delay with Auditor

Specialization as Moderating Variable 497

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