ANALISIS PENGARUH KARAKTERISTIK KUALITAS AUDITOR TERHADAP COST OF DEBT FINANCING: PENGUJIAN DUAL ROLES AUDITOR PADA PASAR OBLIGASI DI INDONESIA

• Main Authors: , Sri Wahyuni, , Prof. Dr. Zaki Baridwan, M.Sc.
• Format: Theses and Dissertations NonPeerReviewed
• Published: [Yogyakarta] : Universitas Gadjah Mada 2013
• Subjects: ETD
• Online Access: https://repository.ugm.ac.id/120610/; http://etd.ugm.ac.id/index.php?mod=penelitian_detail&sub=PenelitianDetail&act=view&typ=html&buku_id=60648
• Institution: Universitas Gadjah Mada

This study aims to examine the effect of auditor quality characteristics, which is proxied by the auditor size and spesialization as well as auditor tenur to the cost of debt financing. The focus of the study was to test the dual role of auditors in the bond market in Indonesia. Samples that used in this study were 554 observation with the 2006-2010 period. The results showed that investors in Indonesia evaluate the dual role of auditors, the information role and insurance role that are included in auditor size and specialization, although in different magnitude (more evaluating the insurance role than the information role). These results imply that they are not only assessing the reputation of "brand name" of the big auditors (Big-4), but also the expertise of auditor specialization. Overall, the results of this study provide empirical evidences that the auditor quality characteristics, namely auditor size and specialization are matter for bond market participants in Indonesia. Auditor tenure has negative impact on cost of debt financing, implying that the results are in line with government regulations concerning the obligation of rotation for Publict Accounting Firms and Publict Accountant. The results provide evidence of the validity of agency theory. Through its dual roles, that are information role and insurance role, auditor size and specialization can reduce agency conflicts between management and investors. These results have methodological implications that auditor size measurement, not only of the large auditor and the small auditor as previous studies but medium auditor must also be considered. The results are useful for regulators to draft Financial Reporting Act and to reinforce rules on rotation Publict Accounting Firms and Publict Accountant in Indonesia.