The impact of audit market concentration on audit quality: evidence from Indonesia

Mutiara Clarina, and Fitriany Fitriany, (2019) The impact of audit market concentration on audit quality: evidence from Indonesia. Jurnal Pengurusan, 57 . pp. 1-12. ISSN 0127-2713


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This study examines the impact of audit market concentration on audit quality when regulation about mandatory audit firm rotation are applied in Indonesia. This study used 2,578 firm-years of data from nonfinancial companies listed on the Indonesia Stock Exchange (IDX) during 2008–2015. Audit quality was measured by discretionary accruals and abnormal working capital, and market concentration was calculated by the Herfindahl–Hirschman Index. The study found that market concentration decrease the accrual discreationer and improves audit quality. This outcome is likely because auditors experience in a particular industry have a better understanding of industry risk and will thus undertake better audit planning and procedures that tend to improve audit quality. So, regulators need to encourage public accounting firms to specialise in specific areas and have better knowledge of the industry to make audit quality better.

Item Type:Article
Keywords:Audit market concentration; Audit quality; Herfindahl index
Journal:Jurnal Pengurusan
ID Code:14567
Deposited By: ms aida -
Deposited On:04 May 2020 07:48
Last Modified:06 May 2020 00:19

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