FAMILY FIRMS, AUDIT FEE, AND AUDITOR CHOICE: EVIDENCE FROM INDONESIA

Senny Harindahyani, Celine Widjaja

Abstract


Abstract; Family firms in Indonesia have an important
role in the Indonesian economy. However, agency
problems might happen inside family firms where it will
lead to conflict of interest and information asymmetry,
along with the entrenchment effect where it leads firms
to produce lower quality earnings report. Research from
305 firms in Indonesia shows that the agency problems
and the entrenchment effect has not affected the family
firms in Indonesia, reflected from the firm‟s decision
making in their amount of audit fee and auditor choice.
This study will contribute by providing an empirical
evidence of the effect of family control on the audit fee
and auditor choice in a developing country. The result
shows that the type of firms has no correlation on the
amount of audit fee paid to the auditor and both firms‟
demands the same level of audit quality where it is
shown by their choices of audit firms, which is Big 4
audit firm or Non-Big 4 audit firm. In conclusion, the
level of agency problems and entrenchment effect tends
to be lower in the family firms of Indonesia.


Keywords


Family Firms, Audit Fee, Auditor Choice, Audit Firms

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DOI: http://dx.doi.org/10.21107/jaffa.v6i2.4936

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