Variable Operation RESEARCH METHODOLOGY

39 are Audit Committee Independence, Audit Committee Expertise, Audit Committee Size, and Audit Committee Meeting. a. Audit Committee Independence Audit committee independence described as a situation where the members of the audit committee should be recognized as an independent party. Audit committee members also must be free from any liability to the company. In addition, the audit committee members also do not have a particular interest to company and must be free from circumstances that cause others to doubt the nature of its independence. The variable measured by the number of members of the Audit Committee. The data is obtained from the annual report as well as the Indonesian Capital Market Directory. b. Audit Committee Expertise In accordance with Bapepam regulation, the audit committee must have at least three 3 members of the audit committee, one of whom is an independent commissioner, who acts as chairman of the audit committee, while the other two members must be independent parties, one of which must have accounting expertise and or financial financial expertise. Audit committee comprised of at least one member who has expertise in the financial sector will be more effective in detecting material misstatements. This variable is measured by 40 the proportion of members of the Audit committee were competent with the number of the Audit committee member. The data is obtained from the annual report as well as the Indonesian Capital Market Directory. c. Audit Committee Size Based on the Circular of directors PT.Bursa Efek Indonesia No.SE-008 BEJ 12-2001 December 7, 2001 and Guidelines for the Establishment of Audit Committee regarding the membership of the audit committee, stated that the audit committee member at least three 3 members, including the chairman of the audit committee. This variable is measured from the number of members of the Audit Committee. The data is obtained from the annual report as well as the Indonesian Capital Market Directory. d. Audit Committee Meeting Based on guidelines, Bapepam mention that the audit committee shall hold a meeting of at least 4 four times a year to discuss the financial reporting with external auditors. This variable is measured on how many times the audit committee to conduct meetings in a year. 2. Dependent Variable The purpose of this research is to examine whether audit committee effectiveness has an association with the timeliness of reporting. 41 Therefore, the dependent variable is timeliness of reporting. In this research, timeliness of reporting is defined as the number of days that elapses between a company’s financial year-end and measured into one, namely: a. Audit Lag Audit lag is measured by number of days between financial statements date until the date of the audit report Dyer and McHugh 1975, McGee 2009, Khasharmeh and Aljifri 2010, Rachmawati 2008 Al-Ajmi 2008; and Perdhana, 2009. According to Elder et al. 2008, the date of the audit report is the date when audit fieldwork has been completed. If there are events after the signing of the audit report, which significantly affects the financial statements, it will be possible for dual-dated audit report. Dual-dated audit report is an audit report that takes two dates, which is the date of audit fieldwork completion and the date of incident investigation completion Elder et al., 2008. This study will use the most recent date for dual-dated audit report. 3. Control Variable Consistent with Wijaya and Rahardja 2012, three corporate characteristics namely company size, auditor firm size, and profitability are included as control variables. a. Company Size 42 Company Size is measured by a natural logarithm of the companies’ total assets. This control variable is used in order to control the variable of audit committee effectiveness to timeliness because large companies are often followed by a large number of investment and media analysts who demand for timely reporting in order to review their performance for investment decision-making Stephen Owusu-Ansah and Stergios Leventis 2006 and the large companies have higher resources, which enable them to pay the auditor a higher audit fees to get the audit done in a shorter period of time Al-Ajmi, 2008. b. External Auditor External Auditor is represented by dummy variable by classifying the Big Four public accounting firm and non-Big Four public accounting firm. The Big Four refers to Klynveld Peat Marwick Goerdeler KPMG, Ernst Young, PricewaterhouseCoopers and Deloitte Touche Tohmatsu. Companies that are audited by public accounting firm associated with the Big Four was given the value ‘1’ while companies audited by non-Big Four public accounting firm was given the value ‘0’. This variable is used as control variable because it is more likely that large audit firms will perform audit faster as they may have the advantage of using presumably more efficient audit 43 technology Newton and Ashton 1989 in Ika and Ghazali 2011. In addition, the international audit firms Big 4 auditors have a tendency to finish audit faster to preserve their reputation Afify 2009 in Ika and Ghazali 2011. c. Profitability Profitability is an indicator of success in the company management activities to getting profit. More higher the company’s ability to getting profit, indicate the higher level of effectiveness in the company’s management. Profitability can be measured by Return on Assets ROA by using the formula profitability divided by total assests Keown 2006:87 in Wijaya and Rahardja 2012. 44 Table 3.2 Research Operational Variable Variable Measurement Scale Audit Committee Independence ACI The total number of audit committee independence Ratio Audit Committee Expertise ACE The total number of audit committee expertise Ratio Audit Committee Size ACS The total number of audit committee Ratio Audit Committee Meeting ACM The total number of audit committee meeting Ratio Company Size CS The natural logarithm of the company total assets Ratio External Auditor EA Dummy, “1” for Big 4 and “o” for Non-Big 4 Numerical Profitability ROA Return on Assets ROA by using the formula profitability divided by total assets Ratio Timeliness AL Total number of days between financial statements date until the date of the audit report Ratio 45 CHAPTER IV RESULT AND ANALYSIS

A. Overview Research Object

1. Description Research Object

This chapter presents the findings of the research. The populations in this study are all companies that go public and listed on the Indonesian Stock Exchange IDX in 2013. The selection of sample is chosen by criteria of population that have explained in research methodology in previous chapter that is taken as annually in 2013. The focus of this research is to look at the effect of audit committee independent, audit committee expertise, audit committee size and audit committee meeting, company size, big 4 auditor, and profitability to the timeliness of company in submitted their financial report. Listed companies often get considerable concern from investors for investment purposes, so the financial audit report can be very useful when presented on time to investors as consideration in investing. The total numbers of companies are being populated for this research is 486 companies listing on the Indonesian Stock Exchange in 2013. 46 Table 4.1 below presents the sample selection process based on established criteria. Table 4.1 Sample Selection Process Based on Criteria No Criteria Total 1. Companies listed on the Indonesian Stock Exchange in 2013 486 2. The company did not have complete data related to the studied variables. 133 3. Outlier Test 65 Total sample during research period 288 Source: Secondary Data Processed

2. Description of Selected Companies’ Sample

Description of Study Sample
Object of the research are companies which is grouped into two categories based on the timeliness submission their financial report, the categories are: a. Companies that are submit their financial report on time to BAPEPAM. b. Companies that are not on time in submit their financial reports to BAPEPAM.