The relationship between audit quality and risk taking toward value creation in Indonesia

Sri, Mangesti; Solimun, Solimun

doi:10.1108/jaee-11-2017-0110

Cited by 9 publications

(12 citation statements)

References 44 publications

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“…Small-size AC has a wide range of expertise and can ensure adequate monitoring (Be ´dard and Gendron, 2010). Sri and Solimun (2019), on the other hand, found no significant relationship between audit firm size and risk-taking behavior in Indonesian firms. Yatim (2009) finds a significant and positive association between AC size and risk management.…”

Section: Audit Committee Size and Corporate Riskmentioning

confidence: 75%

Nexus between audit committee and corporate risk: evidence from Pakistan

Noor

Farooq

Tahir

2022

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Purpose The purpose of this study is to investigate the impact of audit committee (AC) characteristics, such as AC size, AC independence and gender diversity on firm risk in the context of an emerging market. Design/methodology/approach The sample data includes 102 nonfinancial Pakistan Stock Exchange listed firms from 2004 to 2018. Firm risk is measured through three proxies, namely, idiosyncratic risk, total risk and capital expenditure. Along with this, profitability, leverage, market-to-book ratio, firm age, net property plant and equipment (NPPE) and surplus cash are used as control variables. The Housman test is used to select the best model from the fixed-effect model and the random effect model to conclude the findings. Findings According to the study's findings, AC characteristics have a negative and significant relationship with idiosyncratic risk. In addition, a gender-diverse AC has a significant negative relationship with capital expenditure. In connection with total risk, AC characteristics fail to shows any significant relationship. Among the control variables, the results show that profitability stand for return on asset (ROA) and NPPE have a significant negative relationship, whereas market-to-book value has a significant positive relationship with both idiosyncratic and total risk. Practical implications The study's findings offer policymakers, managers and investors guidance. This study will provide new insights to the Pakistani Government, stock market, companies and accounting and auditing regulators in terms of understanding the determinants influencing risk management activities. Furthermore, this study will assist financial institutions in making credit decisions. In addition, this study provides policymakers, such as the stand for Securities and Exchange Commission of Pakistan (SECP), with guidelines for developing policies that strengthen the board governance mechanism. Originality/value This study investigates the impact of AC characteristics on corporate risk, which is rarely discussed in emerging economies.

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Section: Audit Committee Size and Corporate Riskmentioning

confidence: 75%

Nexus between audit committee and corporate risk: evidence from Pakistan

Noor

Farooq

Tahir

2022

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“…Auditor's opinion is a source of information for parties outside the company as a guide for decision making. For potential investors, the auditor's opinion on the financial statements is one of the important considerations in making investment decisions [22]. Information published as an announcement will provide a signal for investors in making investment decisions [23] .…”

Section: Resultsmentioning

confidence: 99%

Examining Community Trust to the Audit Board of the Republic of Indonesia

Widyartati¹,

Prabowo²

2020

Proceedings of the 3rd International Conference on Banking, Accounting, Management and Economics (ICOBAME 2020)

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The second term of Audit Results Summary Report (IHPS) of Audit Board of the Republic of Indonesia or Badan Pemeriksa Keuangan (BPK) concluded that the implementation of commercial bank supervision by OJK for 2017-2019 has met the criteria with exceptions. The exception occurred in the incomplete supervision for several banks. This study aims to determine whether the negative opinion of the BPK has been responded by investors. The research was conducted by comparing the volatility of banks that are excepted by the BPK with the banks that are not excepted by the BPK. The sample of banks that are excepted by the BPK was represented by 4 banks and the banks that are not excepted by the BPK were represented by 31 Banks. The test was carried out using a nonparametric independence t test. The test results show that there is a significant difference between the volatility of banks that are excepted by the BPK and banks that are not excepted by the BPK. The existence of this significant difference provides empirical evidence that investors respond to the negative opinion of BPK. This response shows that the BPK's opinion is trusted and is considered to provide adequate information for investors.

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“…Auditor tenure is the range of auditor's professional care and his/her monitoring ability (Sri and Solimun, 2019). Although prior studies indicate that longer audit firm tenure tends to reduce audit delay, regulators and other financial statement users are concerned that a longer tenure may jeopardize auditors' independence and the quality of audit work.…”

Section: Auditor Tenurementioning

confidence: 99%

The impact of risk-taking and auditor characteristics on value creation in pre-Covid 19 and post-Covid 19 pandemic

Arianpoor

Mizban

2022

MRR

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Purpose This study aims to investigate the impact of risk-taking and auditor characteristics on value creation in companies listed on the Tehran Stock Exchange. In addition, it investigates the moderator role of auditor characteristics in the impact of risk-taking on value creation, especially in pre-Covid 19 and post-Covid 19 pandemic. Design/methodology/approach The information about 199 company in 2014–2021 was examined. In the present study, in accordance with the related theoretical literature and the importance of auditor specialization, auditor tenure and auditor reputation, these factors were considered as the auditor characteristics. Findings The present findings based on the generalized least squares (GLS) method showed that risk-taking positively affects the value creation. The auditor characteristics (auditor specialization, auditor tenure and auditor reputation) have a significant positive effect on the value creation. Furthermore, the auditor characteristics enhance the impact of risk-taking on value creation. The results of generalized method of moments method and robust regression analysis are consistent with the GLS results. To take into account the Covid-19 conditions, the data were divided into pre-Covid-19 and post-Covid-19 years. The results showed that auditor characteristics moderate the impact of risk-taking on value creation in pre-Covid 19 and post-Covid 19. Originality/value The study highlights the role of auditor characteristics in the value creation, especially in the emerging market. Given that Covid-19 has seriously damaged global economic well-being and has put companies at a double risk, the present findings can be useful for managers, investors and the international community, and help company managers make risk-taking policies and select auditors with appropriate characteristics.

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The relationship between audit quality and risk taking toward value creation in Indonesia

Cited by 9 publications

References 44 publications

Nexus between audit committee and corporate risk: evidence from Pakistan

Nexus between audit committee and corporate risk: evidence from Pakistan

Examining Community Trust to the Audit Board of the Republic of Indonesia

The impact of risk-taking and auditor characteristics on value creation in pre-Covid 19 and post-Covid 19 pandemic

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