Companies should consider the size of the company and the characteristics of the auditor when determining professional fees

Oct 13, 2025 by wbrum.org 91 views

The Effect of Auditee Size, Audit Complexity, Company Risk, and Auditor Characteristics of Professional Fees in Manufacturing Companies Listed on the Indonesia Stock Exchange for the 2014-2016 Period

Introduction

The audit process is a crucial aspect of a company's financial management, as it provides stakeholders with an independent assessment of the company's financial statements. However, the cost of audit services can be a significant burden for companies, particularly those in the manufacturing sector. The purpose of this study is to examine the effect of several factors, including auditee size, audit complexity, company risk, and auditor characteristics, on professional fees received by auditors from manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2014 to 2016 period.

Background

The IDX is the primary stock exchange in Indonesia, and it provides a platform for companies to raise capital and increase their visibility among investors. The audit process is an essential aspect of a company's listing on the IDX, as it provides assurance to investors that the company's financial statements are accurate and reliable. However, the cost of audit services can be a significant burden for companies, particularly those in the manufacturing sector. The professional fees paid by companies to auditors can vary significantly, depending on several factors, including the size of the company, the complexity of the audit, the level of company risk, and the characteristics of the auditor.

Methodology

This study utilizes secondary data that can be accessed through the official website of the IDX (www.idx.co.id). The population of this study consisted of 148 manufacturing companies listed on the IDX. The sampling method used was purposive sampling, where researchers chose 50 companies as samples with a three-year observation period, so that the total analysis conducted reached 150 units of analysis. The variables studied in this study include auditee size, audit complexity, company risk, auditor characteristics, and professional fees. To analyze data, researchers use multiple linear regression methods with the help of SPSS 20 software. Before conducting regression analysis, researchers also conduct a classic assumption test to ensure the accuracy of the data used.

Results

The results of this study indicate that simultaneously, the four independent variables have a significant influence on professional fees. This indicates that the auditor must consider all of these factors in determining the cost of audit services that will be charged to the client. Partially, auditee size and auditor characteristics have a positive and significant influence on professional fees, which means the greater the company size and the better the characteristics of the auditor, the professional fees paid also tend to be higher. On the other hand, the complexity of the audit and company risk do not show a significant effect on professional fees. This can be caused by several factors, such as that companies with high audit complexity do not always require higher costs if the auditor feels already experienced enough in handling the case. Likewise with the company's risk, maybe the auditor already has an effective method to overcome the existing risks without having to increase audit costs.

Discussion

The findings of this study provide important insights for companies in the manufacturing and auditor sectors in establishing and formulating professional fees determination strategies. Understanding the factors that influence audit costs can help companies in allocating the budget and selecting the right auditors according to their needs. The sustainability of further research is also expected to reveal more other factors that affect professional fees in a broader context.

Conclusion

In conclusion, this study provides a comprehensive analysis of the factors that influence professional fees in manufacturing companies listed on the IDX. The findings of this study indicate that auditee size and auditor characteristics have a significant influence on professional fees, while audit complexity and company risk do not show a significant effect. The implications of this study are significant, as they provide insights for companies in the manufacturing and auditor sectors in establishing and formulating professional fees determination strategies.

Recommendations

Based on the findings of this study, the following recommendations are made:

Companies should consider the size of the company and the characteristics of the auditor when determining professional fees. This is because the size of the company and the characteristics of the auditor have a significant influence on professional fees.
Companies should not assume that high audit complexity requires higher costs. This is because companies with high audit complexity do not always require higher costs if the auditor feels already experienced enough in handling the case.
Companies should not assume that high company risk requires higher costs. This is because maybe the auditor already has an effective method to overcome the existing risks without having to increase audit costs.
Further research is needed to reveal more other factors that affect professional fees in a broader context.

Limitations

This study has several limitations, including:

The study only focuses on manufacturing companies listed on the IDX. This means that the findings of this study may not be generalizable to other industries or companies.
The study only uses secondary data. This means that the study may not capture the nuances of the audit process and the factors that influence professional fees.
The study only uses multiple linear regression methods. This means that the study may not capture the complexities of the audit process and the factors that influence professional fees.

Future Research Directions

Based on the findings of this study, the following future research directions are suggested:

Investigate the factors that influence professional fees in other industries. This is because the findings of this study may not be generalizable to other industries.
Investigate the nuances of the audit process and the factors that influence professional fees. This is because the study only uses secondary data and may not capture the complexities of the audit process.
Investigate the use of other methods to analyze the factors that influence professional fees. This is because the study only uses multiple linear regression methods and may not capture the complexities of the audit process.

References

[List of references cited in the study]

Appendix

[Appendix containing additional information, such as tables and figures, that support the findings of the study]
Frequently Asked Questions (FAQs) about the Effect of Auditee Size, Audit Complexity, Company Risk, and Auditor Characteristics on Professional Fees in Manufacturing Companies Listed on the Indonesia Stock Exchange

Q: What is the purpose of this study?

A: The purpose of this study is to examine the effect of several factors, including auditee size, audit complexity, company risk, and auditor characteristics, on professional fees received by auditors from manufacturing companies listed on the Indonesia Stock Exchange (IDX) during the 2014 to 2016 period.

Q: What are the variables studied in this research?

A: The variables studied in this research include auditee size, audit complexity, company risk, auditor characteristics, and professional fees.

Q: What is the sampling method used in this study?

A: The sampling method used in this study is purposive sampling, where researchers chose 50 companies as samples with a three-year observation period, so that the total analysis conducted reached 150 units of analysis.

Q: What is the significance of this study?

A: The findings of this study provide important insights for companies in the manufacturing and auditor sectors in establishing and formulating professional fees determination strategies. Understanding the factors that influence audit costs can help companies in allocating the budget and selecting the right auditors according to their needs.

Q: What are the implications of this study?

A: The implications of this study are significant, as they provide insights for companies in the manufacturing and auditor sectors in establishing and formulating professional fees determination strategies.

Q: What are the limitations of this study?

A: This study has several limitations, including:

The study only focuses on manufacturing companies listed on the IDX. This means that the findings of this study may not be generalizable to other industries or companies.
The study only uses secondary data. This means that the study may not capture the nuances of the audit process and the factors that influence professional fees.
The study only uses multiple linear regression methods. This means that the study may not capture the complexities of the audit process and the factors that influence professional fees.

Q: What are the future research directions suggested by this study?

A: Based on the findings of this study, the following future research directions are suggested:

Investigate the factors that influence professional fees in other industries. This is because the findings of this study may not be generalizable to other industries.
Investigate the nuances of the audit process and the factors that influence professional fees. This is because the study only uses secondary data and may not capture the complexities of the audit process.
Investigate the use of other methods to analyze the factors that influence professional fees. This is because the study only uses multiple linear regression methods and may not capture the complexities of the audit process.

Q: What are the recommendations made by this study?

A: Based on the findings of this study, the following recommendations are made:

Companies should consider the size of the company and the characteristics of the auditor when determining professional fees. This is because the size of the company and the characteristics of the auditor have a significant influence on professional fees.
Companies should not assume that high audit complexity requires higher costs. This is because companies with high audit complexity do not always require higher costs if the auditor feels already experienced enough in handling the case.
Companies should not assume that high company risk requires higher costs. This is because maybe the auditor already has an effective method to overcome the existing risks without having to increase audit costs.

Q: What are the implications of the findings of this study for companies in the manufacturing and auditor sectors?

Q: What are the implications of the findings of this study for the development of professional fees determination strategies?

A: The findings of this study provide important insights for the development of professional fees determination strategies. Understanding the factors that influence audit costs can help companies in allocating the budget and selecting the right auditors according to their needs.

Q: What are the implications of the findings of this study for the development of audit standards and regulations?

A: The findings of this study provide important insights for the development of audit standards and regulations. Understanding the factors that influence audit costs can help companies in allocating the budget and selecting the right auditors according to their needs.

Q: What are the implications of the findings of this study for the development of auditor training and education programs?

A: The findings of this study provide important insights for the development of auditor training and education programs. Understanding the factors that influence audit costs can help companies in allocating the budget and selecting the right auditors according to their needs.