The Effect of The Audit Firm Size, Tenure, and Auditor Industry Specialization on Audit Quality

The objective of this paper is to examine the effect of audit firm size, tenure, and auditor industry specialization on audit quality. This study applies multiple linear regression to predict audit quality. Multiple linear regression is extremely powerful when trying to develop a model for predicting a wide variety of outcomes. This paper is an empirical work using a sample of listed Indonesia Stock Exchange. The population of this study encompasses all manufacturing companies that are listed in Indonesia Stock Exchange throughout the years 2011-2014. Audit quality in this study is measured using discretionary accruals. Audit firm size is measured based on the classification of large and small organization, tenure is measured by the period in which the audit services provided, while auditor industry specialization is measured through the auditor who has the knowledge and understanding of the more specific of the characteristics of a particular client's business. The result of study depicted that audit firm size has no effect on audit quality, while tenure has negatively affect and auditor specialization has positively affect on audit quality. The audit firm that affiliated with Big 4 is not likely generating better audit quality than non Big 4. The length of the relationship rise the contradiction to the audit quality. Auditor industry specialization assists clients in enhancing disclosure. This research is expected to provide positive suggestions to the public accountant. The study contributes to auditing literature in the areas of audit quality.