THEORETICAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT The Effect of Audit Opinion on Public Accounting FirmChange
2. THEORETICAL FRAMEWORK AND HYPOTHESIS DEVELOPMENT The Effect of Audit Opinion on Public Accounting FirmChange
According to Kawijaya and Januarti (2002) in Wijayani and Januarti (2011) that common opinion with exception (qualified opinion) tends to be less favored by clients. Clients prefer auditors givingcommon opinion without exception (unqualified opinion) on their financial report.Therefore, clients try to avoid common opinion with exception (qualified opinion).
The audit opinion provides useful information for the users of external financial report because it is useful for investment decision. Management of the company will replace its auditors because they provide the audit opinion which is not expected on the financial report of the company and will look for auditors who are more manageable. A company tends to move PAF after receiving qualified opinion on its financial report (Carcello and Neal, 2003 in Wijayani and Januarti, 2011).
Divianto‘s (2011) and Buchari‘s and Marita‘s(2014)researches proved that the audit opinion affects PAF change. In accordance with the above explanation,the hypothesisproposedis as follow:
H 1 : Audit’sopinion affectsPublic Accounting Firm Change The Effect of Management Substitution on Public Accounting Firm Change
Management substitution is company‘s director change caused of themeeting decision of shareholders or the management quit because of their own willing. These management changes are often accompanied by changes in the company's policies, including in choosing PAF. The new management hopes that the new PAF can be more cooperative and more able to give their opinions as expected by management, accompanied by their own preferences about the auditor intends to use. The company will look for PAF aligned with their accounting policies and report (Sinarwati 2010 in Saputri and Achyani, 2014).
Susan‘s and Trisnawati‘s (2011) and Endina‘s et.al (2012) researchesshowed that the management substitution affects PAF change. In accordance with the above explanation, the hypothesisproposed is as follow:
H 2 : Management Substitution affects Public Accounting Firm Change
The Effect of the Client’s Company Measurement on Public Accounting Firm Change
Company measurement is the bigness of the company measurement measured based on total assets (Saputri and Achyani, 2014). Companies with small total assets tend to conduct PAF change. It means, the smaller the company measurement will encourage PAF change and look for PAF that is not expensive to rent. Similarly, the larger the scale of a company then the less tendency they have to change auditors because new auditors will need more time to understand the company‘s procedures so that gives effect on the late submission of audited financial report. So that large companies tend to retain their auditors (Wenny, 2014).
Vina Kurniaty‘sresearch (2014) proved that client‘s company measurementaffects PAF change. In accordance with the above explanation, the hypothesisproposed is as follow:
H 3 : Client’s company measurementaffects Public Accounting Firm change TheEffect of the Audit Committee Substitution on Public Accounting FirmChange.
The audit committee is a body set up in the client‘s company whose task is to maintain the independence of the accountant inspectors on the management (Supriyono, 1998, in Endina et. al, 2012). The audit committee also plays a role in supervising the financial reporting process by management, thus the agency problem such as management measures for the prosperity ofthemselves can be minimized. One of the aims of the establishment of the audit committee is to recommend the selection of an external auditor to audit the company. The agency is in charge of selecting and assessing the performance of the company of public accounting firms (Susiana and Arleen, 2007 in Endina et.al, 2012).
The audit committee should have the assessment criteria for the choice of external auditors to be his favorite and have met the standards and criteria specified for auditing a company. If there is a change in the members of the audit committee it is possible to get the recommendation result on the PAF appointment that is different from the previous PAF (Endina et.al, 2012).In accordance with the above explanation,the hypothesisproposed is as follow:
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