KAP Reputation, Audit Fee, Audit Tenure, and Audit Quality of IDX-Listed Companies (Journal of Business Social and Technology)

Summary

• A quantitative study analyzed 119 listed firms on the Indonesia Stock Exchange (IDX) across 595 firm-year observations from 2021 to 2025.p.4
• KAP reputation significantly reduces the log-odds of financial restatement with a coefficient of −0.9063 (p = 0.0268), indicating higher audit quality for Big Ten audit firms.p.7
• Audit fee shows a positive coefficient of +0.9152 (p = 0.0000), indicating that larger fees accompany a higher probability of financial restatement.p.7
• Audit tenure yields a coefficient of −0.1809 (p = 0.2025), demonstrating no statistically significant relationship with audit quality.p.7
• Out of 119 sample companies, 54 companies (45.39%) were audited by internationally affiliated Big Ten KAP and 65 companies (54.61%) utilized local KAP.p.5
• Across the 595 firm-year observations, financial statements were restated in 445 instances and non-restated in 150 instances.p.6

Key insights

1. Big Ten auditor affiliation significantly lowers financial statement restatement probability, consistent with higher audit quality.p.1
2. Higher audit fees correspond to an increased likelihood of financial restatements, aligning with the economic-bonding perspective and engagement risk-based fee setting.p.1
3. Audit tenure does not exercise a statistically significant influence on audit quality among IDX-listed firms.p.1
4. The binary logistic regression model achieves a McFadden R² of 0.6706 and demonstrates adequate fit via the Hosmer–Lemeshow test (p = 0.1194).p.1
5. PCAOB inspections flagged Part I.A deficiencies in 46% of audited engagements reviewed in 2023, up from 40% in 2022.p.2
6. Restatements by U.S. SEC-registered companies totaled 1,470 in 2021, 458 in 2022, and 430 in 2023.p.2
7. Audit fees among sampled firms averaged IDR 742,937,857 and reached a maximum of IDR 11,573,410,558.p.6