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"FACTORS AFFECTING THE REPLACEMENT OF PUBLIC ACCOUNTING FIRM ON GO PUBLIC LISTED COMPANIES IN BEI"

SKRIPSI
Diajukan sebagai salah satu syarat untuk menyelesaikan Program Sarjana (S1) pada Program Sarjana Fakultas Ekonomi Universitas Diponegoro Disusun oleh : VARADITA FEBRIANA NIM. C2C607147

FAKULTAS EKONOMIKA DAN BISNIS UNIVERSITAS DIPONEGORO SEMARANG 2012

PERSETUJUAN SKRIPSI

Nama Penyusun Nomor Induk Mahasiswa Fakultas/Jurusan

: Varadita Febriana : C2C607147 : Ekonomi/Akuntansi

Judul Skripsi

: FAKTOR FAKTOR YANG MEMPENGARUHI PENGGANTIAN KANTOR AKUNTAN PUBLIK DI PERUSAHAAN GO PUBLIC YANG TERDAFTAR DI BEI

Dosen Pembimbing

: Drs. H. Moch. Didik Ardiyanto, MSi., Akt.

Semarang, 02 November 2011 Dosen Pembimbing,

(Drs. H. Moch. Didik Ardiyanto, MSi., Akt.) NIP. 132003713

GRADUATION CERTIFICATION EXAM

Nama Mahasiswa Nomor Induk Mahasiswa Fakultas/Jurusan

: Varadita Febriana : C2C607147 : Ekonomi/Akuntansi

Judul Skripsi

: Faktor-Faktor Yang Mempengaruhi Penggantian Kantor Akuntan Publik di Perusahaan Go Public yang Terdaftar di BEI

Telah dinyatakan lulus ujian pada tanggal 22 Februari 2012

Tim Penguji 1. Drs. H. Moch. Didik Ardiyanto, Msi., Akt. (.........................................)

2.

Prof. Dr. H. Abdul Rohman, M.Si., Akt

(.........................................)

3.

Dra. Hj. Zulaikha, Msi., Akt

(.........................................)

THESIS STATEMENT OF ORIGINALITY


The undersigned below me, Varadita Febriana, stating that the thesis with the title: Factors Influencing Replacement of Public Accounting Firm Go Public Listed Company on the Stock Exchange, is the result of my own writing. I hereby state that in this paper there is no whole or in part written by others that I took with a way to copy or imitate the form of a series of letters or symbols that show ideas or opinions or thoughts of another author, whom I consider as if the my own writing, and / or there are no parts or the whole text that I copy, imitate, or that I took from the writing of others without giving the original author recognition. When I perform acts contrary to the foregoing, whether intentional or not, I hereby declare interesting thesis I ask as a result of my own writing this. If later proven that I take action to copy or imitate the writing of others as if the ideas of my own, mean degree and diploma awarded by a university that has been canceled I received.

Semarang, 02 November 2011 Yang membuat pernyataan,

(Varadita Febriana) NIM : C2C607147

ABSTRACT

An auditor should always maintain their independence. To keep it independent it is necessary to have auditor switching. Auditor switching could happen mandatorily (because of the rules which persistent it) and also voluntarily. Some former research show different research each other. This research aims to analyze concerning factors that might influence auditor switching in Indonesia. Those factors are management changes, accountant opinion, financial distress, public accountant firms size, percentage of the change of Return on Assets and client size. Population of this research are manufacturing companies which are listed in Bursa Efek Indonesia (BEI) in the year 2006-2009. Data collecting method which used in this research is method purposive sampling and obtained 139 companies as research sample. The type of the data used is published audited yearly financial statement. Hypothesis in this research are tested by logistics regression analytical method. Result of this research is that management changes, public accountant firms size, financial distress, and percentage of the change of Return on Assets have significant effect on auditor switching in Indonesia. While other variables in this research like accountant opinion and client size, do not have significant effect to auditor switching in Indonesia. Keyword : independence, auditor switching, audit rotation, mandatory, voluntary.

INTRODUCTION
Assalamualaikum Wr. Wb. Alhamdulillahirobbil'alamin pray author praise and thanks to God who always bestow His blessings and guidance to writing essay entitled "Factors Influencing Public Accountant MAIN REPLACEMENT IN ENTERPRISE GO PUBLIC WHO ARE REGISTERED IN BEI "can be resolved as a condition for completing studies at the Masters Program (S1) Department of Accounting Faculty of Economics Diponegoro University. Author realized that in the process of restructuring this essay got a lot of help, guidance and support from many quarters. Therefore, the author would like to take this opportunity to express my gratitude to: 1. Sire Assoc. Drs. H. Mohamad Nasir, M.Si., Akt., PhD as Dean of Faculty of Economics Diponegoro University 2. Mr. Drs. H. Sudarno, MSI., Akt., Ph.D professors as saints who have helped in many academic activities and provide assistance and input 3. Mr. Drs. H. Moch. Teach Ardiyanto, MSI., Akt as a faculty mentor to provide guidance and input patient to the author, even prayer and passion to this essay can be solved well.

4. 2 Regular Accounting professors around the knowledge and assistance provided. 5. Family loved author: Mr. Didit Budi Ruscahyono, Mother Masita Mustikasari. Thank you for all the support and material well moril and endless prayers to the author. Thank you also for the sincere affection, trust, and his patience. 6. My brother beloved Nikita desi Dita Alvita, thank you for always be an entertainer in every situation. 7. Kakung late grandfather Mr. Ashari Sunarko admin, thanks for ocean knowledge that he had given, sacrifice and sincere love of your life until the end of life. Motivation is terbesarku you. 8. Riyan Darmawan, thank you for everything. Good support, enthusiasm, prayers and love. All that is very valuable for writers. 9. One heart and soul companions in arms, Rahma safrinda araminta, Rr. Dyah kusumaningrum and Komala Yunianti hasan goddess. Thank you for all the support, prayer, spirit and help that could be squeezing the author. 10. Ananda Erista Harviyanti and Valentina, thank you for the motivation, enthusiasm and his prayer for this. 11. Habenk friends: atria, amanda, triad, fitriyani, om love, identity, Randi, arya, alib, jidan,

Vera, and that can not be mentioned one by one. Thank you for 4 years full story.

12. All parties can not be mentioned one by one for their help, and its support. May the good God will reward you STW. Amin yes Robbal alamin. Author realized that in writing this essay still many deficiencies due to limited knowledge and experience, up to criticism and suggestions will be highly beneficial for the writer felt. Hopefully, this essay has benefits and can be used as additional information and discourse for all those in need or who will do research of some kind. Semarang, 02 November 2011 Penulis

Varadita Febriana

MOTTO AND PERFORMANCE

"Verily after difficulty there is no facility. So when you have finished (from a business), turn in earnest (course) to another. And just to let you Lord thine hope " (Q.S Nature of articles: 6-8)

You got a dream, you Gotta protect it. Something people can not do themselves, that's for hire wanna tell you you can not do it. Something you want? Go get it. Period. (Pursuit of Happiness)

-PERFORMANCE-

I present this essay assigned: all the blessings God and His grace Alm. Grandparent who is the greatest motivation Papa, Mama, Brother and the whole extended family

The friends and friends accounting 2007 TABLE OF CONTENTS

Page

TITLE PAGE .................................................................... i PAGE APPROVAL ......................................................... ii APPROVAL PAGE GRADUATION. iii STATEMENT OF ORIGINALITY Thesis ......................................... ABSTRACT ................................................................................ v ABSTRACT ................................................................................ vi Foreword vii MOTTO AND OFFERINGS ............................................... ....................... x Sign up LIST OF FIGURES xii

APPENDIX LIST ................................................ ................................... xiii

CHAPTER I INTRODUCTION ............................................................ 1

1.1 Background ...................................................... 1

1.2 Problem Formulation ............................................................. 10

1.3 Research Objectives and Purpose ............................................ 11

1.3.1 Research Objectives ............................................................... 11

1.3.2 Usability Research ................................................... 12

1.4 Systematics Writing ......................................................... 13 CHAPTER II LITERATURE REVIEW ........................................................ 14 2.1 Basis Theory ................................................................. 14 2.1.1 Agency Theory ..................................................... .................. 15 2.1.2 Theory of Replacement Public Accounting Firm 16

2.1.3 Law No. 5 of 2011 .................................... 19 2.1.4 Regulation of the Minister of Finance of the Republic of Indonesia Number 17/PMK.01/2008 about "public accounting services" article 3 of 20 Management ................................................. 21 2.1.5 Substitution 2.1.6 Audit Opinion ......................................................... 22

2.1.7 Difficulties Corporate Finance ...................................... 25

2.1.8 Size Public Accounting Firm ....................................... 27

2.1.9 Percent Change ........................................... ROA 29

2.1.10 Client Company Size ........................................ 30

2.2 Previous Research .......................................................... 31,

2.3 Framework ........................................................... 36

2.4 Hypothesis ........................................................................ 38

2.4.1 Substitution Effect Management

Replacement of the 38 KAP

2.4.2 Effect of Audit Opinion on KAP Replacement ................. 39

2.4.3 Effect of Corporate Financial Difficulties

the KAP Replacement ............................................ 40

2.4.4 Influence of the Replacement KAP KAP Size ................ 41

2.4.5 Effect of Percentage Changes in ROA

the KAP Replacement ............................................ 43

2.4.6 Effect of Company Size Clients Replacement of the 44 KA

P LIST OF TABLES

Page Table 2.1 Previous Research .............................................. 35 Table 4.1 Table with the sample selection process criteria ................................. 56 Table 4.2 Replacement of Auditor ............... ....................................... 57 Table 4.3 Descriptive Statistics Variable ............................................. 58 Table 4.4 Frequency Table 58 Table 4.5 Assessing Overall Model ............................................. 61 Table 4.6 Coefficient of Determination ................................................... 62 Table 4.7 Regression Model to Test Feasibility Hosmer and Lemeshow Test 62 Table 4.8 Multicollinearity Test ....................................... Matrix ............... 63 Table 4.9 Classification ................................................... 64 Table 4.10 Logistic Regression Results ................................................ 65 Table 4.11 Summary of Results .......................................... 75

LIST OF FIGURES Page Figure 2.1 Framework .................................................... 38

APPENDIX LIST Page Appendix A List of Samples ............................................. 83 Appendix B Sample Company Data .......................................... 84 Appendix C SPSS Output ................................................

CHAPTER III RESEARCH METHODOLOGY .................................................... 45 3.1 Research Variables and Operational Definitions .............................. 45 3.1.1 Dependent Variables ...................................................... 45 3.1.2 Independent Variables ................................................... 45 Company Management 3.1.2.1 Substitution ......................... 46 3.1.2.2 Audit Opinion ..................................................... 46 3.1.2.3 Corporate Financial Difficulties ............................. 46 3.1.2.4 Size Public Accounting Firm .............................. 48 3.1.2.5 Percentage Change .................................. ROA 48 3.1.2.6 Client Company Size .................................... 49 3.2 Determination of Population and Sample ............................................. 49 3.3 Types and Sources of Data ........................................................ 50

3.4 Method of Data Collection ................................................... 50 3.5 Data Analysis Methods ......................................................... 51 3.5.1 Descriptive Statistics ...................................................... 51 3.5.2 Research Hypothesis Testing ....................................... 51

3.5.2.1 Assessing Overall Model (Overall Model Fit) ......... 52 3.5.2.2 Feasibility Testing Regression Models ......................... 52 3.5.2.3 Coefficient of Determination (R Nagelkelkre Square) ............ 52 3.5.2.4 Multicollinearity Test ........................................... 53 3.5.2.5 Classification Matrix ............................................. 53 3.5.2.6 Logistic Regression Model ................... Shaped 53 CHAPTER IV RESULTS AND ANALYSIS .................................................... 55 4.1 Description of Research Objects ................................................... 55 4.1.1 General Description of Research ........................................... 55 4.2 Data Analysis ................................................................... 57 4.2.1 Descriptive Statistics ...................................................... 57 4.2.2 Research Hypothesis Testing Results ................................. 60

4.2.2.1 Assessing Overall Model (Overall Model Fit Test) ... 61 4.2.2.2 Coefficient of Determination ........................................ 62 4.2.2.3 Feasibility Testing Regression Models ......................... 62 4.2.2.4 Multicollinearity Test ........................................... 63 4.2.2.5 Classification Matrix ............................................. 64 4.2.2.6 Logistic Regression Models ....................................... 65 4.3 Research 67 4.4 Interpretation of Results ............................................................... 67 4.4.1 Substitution Effect Management Replacement of the KAP ... 67 4.4.2 Effect of Audit Opinion on KAP Replacement .............. 69 4.4.3 Effect of Corporate Financial Difficulties the KAP Replacement ............................................ 70 4.4.4 Influence of the Replacement KAP KAP Size ............... 71 4.4.5 Effect of Percentage Changes in ROA the KAP Replacement ....................................... 73 4.4.6 Effect of Company Size Clients Replacement of the KAP ... 74 CHAPTER V

CONCLUSION ....................................................................... 5.1 Conclusion ..................................................................... 76 76 5.2 Limitations .................................................................... 77 5.3 Advice ............................................................................ 78 REFERENCES .................................................................... 79 ANNEX... 98

CHAPTER I INTRODUCTION

In the preliminary study will be explained aspects ranging from the background of the problem, formulation of the problem, the purpose and use of research and writing sistematika. Each explanation is as follows:

1.1 Background of Problem Financial report is the medium used by the management to show how their work performances. In addition to the work performed, financial reports are also used as the basis for determining or assessing the financial position of an enterprise. Many stakeholders in the financial reporting of a company, amongst enterprise owners themselves, lenders, financial institutions, investors, governments, civil society and other parties. But in the financial statement presentation, there will be a conflict between the agent and the principal. The conflict occurred because of personal interests on the financial report. Given the large number of stakeholders on the financial report, the information presented in the financial report to be fair, trustworthy and not mislead the wearer to their own needs of stakeholders are met. On conflict of interest

which contained agency theory illustrates that top managers as agents in an enterprise, which has a different significance as the principal business owners, but both seek to maximize their satisfaction. Problems arise with the information imbalance, where top managers as agents have a tendency to hide important information from the owner of the

enterprise. Information that will disproportionately terkurangi with the audit of financial reports by independent auditors. Auditors are required to be objective and independent of the information presented by the management of the enterprise in the form of financial reports. Keindependenan objectivity and was intended to raise the level of reliability of corporate financial reports. Until people can get reliable financial information as a basis for decision making. The duties of a public accountant as independent parties who will give an assessment of the reasonableness of the financial report presented by the company management. So that client companies can produce the quality of financial reporting and to keep independensinya then do auditor rotation. Presence in Indonesia regulations governing the auditor rotation as outlined in the Regulation of the Minister of Finance Republic of Indonesia Number 17/PMK.01/2008 chapter 3, require enterprises to change auditors is mandatory to reduce the occurrence of decline independence and audit quality associated with the company's financial reporting.

The existence of the duty of auditor rotation raises corporate behavior to do KAP replacement. KAP replacement company in a voluntary basis by several factors, among others namely the replacement of management, the audit opinion, the company's financial difficulties, KAP measurements, the percentage change in ROA, and firm size client. Wijayani (2011) states that independence is key for public accountant profession. Independence is an absolute must have in ourselves auditors when they conduct audits that require it on the reasonableness of the financial statement attestation client. Attitude means that auditor independence is not easily influenced, so the auditor will report the discovery of what the implementation process for the audit. According Winarna (in Wijayani 2011) stated that the independence of public accountants include two aspects, namely: (1) independence in fact, and (2) independence in appearance. Independence in fact mean the availability of self-honesty in accountant in considering the facts and does not favor in formulating and expressing his opinion. Whereas independence in appearance means the availability of community impact that act independent public accountant to accountant general public should avoid the conditions or factors that can lead to dubious public freedoms, for example: Provide facilities and packets by the client, the length of the relationship between public accountant and client, relationship

family accountant and client, effort and financial relationship with the client.

Flint (in Nabilla 2011) expressed the opinion that independence would be lost if the auditors involved in a personal relationship with the client, as this could affect their mental attitude and their opinion. Diaz (in Wijayani 2011) argues that long-time alliance audit (audit tenure) is one of the things that can cause loss of auditor independence, audit alliance for a long time can cause a sense of "comfortable" in his relationship between the client and the auditor's enterprise management (KAP ) and the feeling bound by a sense of emotional and strong loyalty, so it will get to the point where the auditor's independence is threatened. The length of time the audit alliance also gives a relationship "over familiarity" to enterprise management likely will ignore the quality and competence of auditors dimilki while doing his job as an auditor. As a result, the quality and competence of auditors work can be decreased when they start to make assumptions that are not accurate and not objective evaluation of current evidence (Nabilla, 2011). According Wjayanti (2011) criticism of the independence can not be separated again from the fact comparison of the Public Accountant Office with the audited company. Total office accountant always smaller than the total number of enterprises requesting audit services. Accountant's office itself has a quality difference between the auditor's office of the accountant's office the other so that the companies will likely choose the accountant's office with good quality auditor. In addition, there was a tendency that firms

will only choose the accountant's office agreed with the choice of a particular accounting method. In conclusion, the relationship between the client and the auditor was going to happen naturally and are most likely to be standing in a long period of time. On the other hand do not mind the auditors profession to serve their clients in a long time, but there appears to be reluctance on concerns that the old service can cause the "cozy relationship" that may threaten the independence

of the auditor to have the restrictions in the audit alliance. To keep public confidence in the audit function and to protect auditor objectivity, through a series of conditions, auditors profession forbidden to possess a personal relationship with their clients that can give rise to potential conflicts of interest. One was organized by a mandatory rotation of auditors (AICPA, 1978a; AICPA 1978b), as they may increase the auditor's ability to protect the public through increased vigilance for every possible disqualification, increase service quality and prevent a closer relationship with the client (Mautz, 1974; Winters, 1976; Hoyle, 1978; Brody and Moscove, 1998; Nasser et al., 2006 in Wijayanti 2010). There was disagreement about the idea of auditor rotation obligations held by the AICPA because they believe that the cost is greater than the benefits derived. Rotation and switching that often results in increased audit fees as a benefit to be gained from lower costs following the initial years of each audit will not be fully realized.

Another drawback is that the knowledge gained for improving the quality of audit work will be in vain with the adoption of a new auditor (AICPA, 1992 in Nasser et al. Wiyanti 2006 in 2010). The phenomenon of replacement auditor or Office Public Accountant (KAP) was very interesting to explore, most likely many factors that can influence the decision to perform the replacement auditor enterprises or KAP. These factors can be influenced by the client as well as the factors derived from the auditor. According Febrianto (2009), the replacement auditor can happen in voluntary (voluntary) or mandatory (compulsory). If replacement occurs in voluntary auditor, the causative factors derived from the client side (eg, financial difficulties, a failed management, change ownerships, Initial Public Offering, etc.) and from the presence of auditors (eg audit fees, audit quality, etc. ). Conversely, if the replacement is mandatory occur, as happened in Indonesia, it happens because of a rule that obliges. Sumarwoto (2009) also noted that the rotation KAP (KAP replacement) can be mandatory because the regulations require but also can be voluntary. The empirical evidence indicates, that a company that does a voluntary replacement of KAP, KAP is because the former act conservatively and not in line with the interests of company management, so companies do KAP

replacement is voluntary. Due for replacement KAP KAP want to find a company able to meet its interest. According Sinarwati (2010), if replacement occurs KAP by

enterprises outside the provisions of the regulations will raise questions even suspicion from investors so important to know the factors involved. These previous studies have already been done by several researchers, among others Mardiyah (2002), Kawijaya and Juniarti (2002), Nasser et al. (2006) in Malaysia, and Sudarma Damayanti (2007), Suparlan and Andayani (2010), Sinarwati (2010), Wijayanti (2010), Wijayani (2011), Sujak (2011) and Nabilla (2011). First, the study Mardiyah (2002) used the dependent variable is the switch auditors and the independent variable used is the change in the contract, the auditor effectiveness, client reputation, audit fees, client factors, factors Auditor. Second, the study Kawijaya and Juniarti (2002) used the dependent variable is the change of auditors and the independent variable used is qualified audit opinion, mergers, management changes, expansion. Third, research Nasser, et al. (2006) conducted in Malaysia. This study examined the audit tenure and switching behavior within auditing in Malaysia for the period 1990-2000. But at that time, still be voluntary auditor rotation. Dependent variable used switching auditors and the independent variable is a measure of the client and the Financial distress. Fourth, the research done and Sudarma Damayanti (2007) in Indonesia. The data used in this study for 3 years (2003-2005).

ROA changes. Fifth, the study Suparlan and Andayani (2010) used the dependent variable is the displacement Office investigator Public Accountant and researchers used the independent variable is public ownership, institutional ownership, increase the number of shares, board of commissioners, management turnover, leverage, ROE (Return On Equity ), ukura client. Sixth, the study Sinarwati (2010) used the dependent variable is the turn of the KAP and the independent variable used was the turn of management, financial distress, going concern opinions, auditor reputation. Seventh, the study done by Wijayanti (2010) in Indonesia. Period of data used for 4 years (2004-2008). Researchers used the dependent variable is switching auditors

and the independent variable is a measure used KAP researchers, client size, client growth rate, financial distress, management turnover, the audit opinion, audit fees. Eighth, the analysis conducted by Wijayani (2011) in Indonesia. Data used in the study for 7 years (2003-2009). Dependent variable used by the researchers is switching auditors and the independent variable used is the turn of management researchers, the audit opinion, financial distress, the percentage change in ROA, a measure of KAP, client size. Plan, research conducted by Sujak (2011) in Indonesia.

ROA changes. Finally, the analysis conducted Nabilla (2011) in Indonesia. Period of data used for 5 years (2005-2009). Researchers used the dependent variable is switching auditors and the independent variable is a measure used KAP researchers, client firm size, firm growth rate client, the client company's financial condition, and audit tenure. This study is the modification of the research design and Sudarma Damayanti (2007). Research variables used in this study uses variables such as the research study and Sudarma Damayanti (2007), that management turnover, opinions accountant, audit fees, company's financial difficulties, a measure of KAP, and the percentage change in ROA. But the researchers write variable audit fees due to limited data on the amount of the fees in each of the audit of financial reports audited by Public Accountant Office nice Big Four and nonBig Four. In this study, researchers also add other independent variables that were not considered by Damayanti and Sudarma (2007) in his study, that is a measure of client companies. Researchers also extend the period of study done by Damayanti and Sudarma (2007), which is confined to three years (2003-2005), became five years (2006-2010). By adding a period expected to affect the results of research studies.

From the description that was presented the study titled: "Factors Influencing Public Accountant MAIN REPLACEMENT IN GO PUBLIC COMPANY ARE REGISTERED IN BEI"

1.2 Summary of Problems

From the background and motivation have shown previously, visible presence of factors that affect the replacement KAP in Indonesia. It was because of some other factor that is the turn of the management, the audit opinion, financial difficulties of enterprises, KAP measurements, the percentage change in ROA and firm size client. Additionally also from various studies on KAP replacement has done a lot, but always research results show the empirical evidence differently. Based on the foregoing, this study tried to test back any factors that influence the decision to do business in Indonesia KAP replacement. Formulation of the problem in this study are: 1. What is the change of management at the enterprise influence KAP replacement in Indonesia? 2. What influences the audit opinion on the KAP replacement company in Indonesia? 3. What is the company's financial difficulties affecting the enterprise KAP replacement in Indonesia?

4. What is the measure of replacement KAP KAP influence on enterprises in Indonesia? 5. What is the percentage change in ROA influence KAP replacement on enterprises in Indonesia? 6. What is the client firm size affect KAP replacement on enterprises in Indonesia?

1.3 Purpose and Use Research In the research purpose will be explained on the results to be achieved from this study, whereas in the study will be explained use of the benefits of this research hoped to various parties.

1.3.1 Research Purpose The purpose of this research include: 1. Obtain empirical evidence of the effect on the change of management at the enterprise KAP replacement in Indonesia. 2. Obtain empirical evidence of the effect on the audit opinion on the KAP replacement company in Indonesia. 3. Obtain empirical evidence of the effect on the company's financial difficulties KAP replacement on enterprises in Indonesia.

4. Obtain empirical evidence of the size effect on substitution KAP KAP on enterprises in Indonesia. 5. Obtain empirical evidence of the effect on the percentage change in ROA KAP replacement on enterprises in Indonesia. 6. Obtain empirical evidence of the client firm size effect on KAP replacement on enterprises in Indonesia.

1.3.2 Use Research From the results of research done expected to provide the following benefits:

1. For Public Accountant Profession Be material information on the practice of the profession of public accountant who performed industrial KAP replacement. 2. For Regulator Be one of the sources for the relevant regulatory makers with KAP practice by enterprises go public very closely related with and UUPM UUPT. 3. For Academics Results from this study are expected to provide their views and insights on the development of auditing in particular about KAP replacement.

4. For Researchers More This study as a source of reference and information for further research on the possible replacement of KAP discussion.

1.4 Sistematika Writing Sistematika writing used in this study are as follows: CHAPTER I INTRODUCTION This chapter decomposes the problem background, problem formulation, the purpose and use of research and writing sistematika. CHAPTER II Literature review This chapter contains the theoretical background, previous research, frame of mind, and hypotheses. CHAPTER III RESEARCH METHOD

This chapter contains a description and definition of variables operasionalnya study, population and sample, the types and sources of data, methods of data collection and analysis methods used in this study. CHAPTER IV RESULTS AND ANALYSIS This chapter consists of descriptions of objects of research, data analysis, and interpretation of results. CHAPTER V CONCLUSION This chapter consists of conclusions, study limitations, and suggestions. CHAPTER II LITERATURE REVIEW

In the literature review section will explain aspects of the research consists of theoretical foundation that supports research, research tools, framework, hypotheses contained in this research. Each explanation is as follows.

2.1 Basis Theory The existence of the theoretical basis used for the translation of theory and arguments that will be used to underpin, strengthen and assist in solving problems and formulating research hypotheses. The basic theory used in this study is the Agency Theory, Theory of reimbursement Public Accountant (Auditor Switching). Supported also by the Act No. 5 of 2011, Regulation of the Minister of Finance of the Republic of Indonesia Number 17/PMK.01/2008 about "public accounting services" chapter 3, Substitution Company Management, Audit Opinion, Financial Difficulties Company, Firm Size, Percentage Changes in ROA , and the size of the Client Company.

2.1.1 Agency Theory Discusses agency theory and principal agent problems in the separation between ownership and control of the company, between different suppliers of capital, and the separation of underwriting the risk, decision-making and control functions within the company (Jensen and Meckling, cited by Morris, 1987, in Widiawan 2011) . Party is acting as principal shareholder, while the agent is acting as manager. Problems that then arise in agency relationships is lack of completeness of information, ie when all the conditions are not known by both parties. This is called information asymmetry. To reduce the information asymmetry, there are solutions that can be taken is to do with the auditor's engagement (KAP) to evaluate the performance of managers and providing incentives to managers, such as stocks, so that the interests of investors and managers can be aligned. Agency theory suggests that the Management acting on their own interests rather than acting in the interests of the investors as the rightful owners of the company. This will form the protection of the interests of shareholders and creditors as opposed to dishonesty committed management. Form of accountability in the management of the agency concept is shown in performance management is concerned. Contradictions that arise in the election because of the quality of KAP KAP impact on user perception of the auditor, and costs (audit fees) incurred by the company.

Company that has financial problems will pick a good KAP. This is done so that the weaknesses of the company will be covered with a good reputation of the firm is chosen. Nevertheless, the desire to choose a great KAP hindered by financial capability, so the companies that have the financial problems the company's financial ability to pay attention in choosing public accounting firm.

2.1.2 Theory of Replacement Public Accounting Firm

Switching is a replacement auditor auditor (KAP) is performed by the client company. It can be caused by several factors, namely the merger between the two companies are different public accounting firms, public dissatisfaction with the former accounting firm, and the merger between public accounting firm (Halim, 1997: 79-80 in Damayanti and Sudarma 2007) Damayanti and Sudarma (2007) suggest several factors that affect the company moved KAP, ie change management, accountant opinion, audit fees, financial difficulties, the firm size and the percentage change in ROA. Kadir (in Wijayanti 2010) suggests two approaches that can be used to explain why the company moved KAP, the perspective of the auditor and the company's perspective. Similar to Kadir (1994), Mardiyah (2002) also suggested two factors that affect the company's move is a factor accounting firm client (Client-related Factors), namely: financial difficulties, management

that fails, change ownership, Initial Public Offering (IPO) and the factors auditors (auditor-related Factors), namely: audit fees and audit quality. In Indonesia, KAP rotation is mandatory with the enactment of Regulation of the Minister of Finance. On mandatory rotation environment, in addition there will be companies that will have to rotate the Firm as mandatory, it is possible to rotate KAP company voluntary. Empirical evidence shows that firms that rotates voluntary KAP, KAP earlier due to be conservative and not in line with the interests of the management company, so the company's voluntary rotate KAP possible because the company wants to find the firm that can meet their interests. In an environment that mandatory rotation, where the period of the relationship between the client and the auditor is limited to a certain period, the auditor incentives may be significantly different (Febrianto, 2009) When a client replace its auditors without a regulation requiring the replacement is done, then the possibility that occurs is resigning auditor or auditors forcibly terminated by the client. But the focus is why it can happen and where clients move. If the transfer occurs because the auditor is unable to give a satisfactory opinion and according to expectations or that the company called an unqualified opinion, the company will move to the auditor that can

satisfy the company's expectations by providing an unqualified opinion. So the main concern is on the client.

Replacement auditor is obliged to voluntarily be distinguished on the basis of which party is the focus of attention from the issue. If the replacement auditor was involuntary, the main concern is on the client side. Conversely, if a change occurs on a mandatory basis, the main attention turned to the auditor (Febrianto, 2009). In accordance with what is stated by Febrianto (2009), if replacement occurs due to an auditor regulation the focus of attention will shift to a replacement auditor. If a change of auditor is mandatory then what happens is separated auditor forced by regulation. When a client is looking for a new auditor, then at that time owned by the client information is greater than the information held by the auditor. This is logical because the information asymmetry clients definitely choose auditors that will most likely be easier to agree about their accounting practices. Meanwhile, the auditor may not have complete information about their clients. If then the auditor willing to accept new clients, then this could happen because the auditor has had enough information about the new client or auditor do it for other reasons, such as financial reasons (Febrianto, 2009). According to the General Accounting Office (GAO), 2003, Periodically rotate the Firm will provide a new perspective (fresh look) at KAP and help companies deal with the financial reporting exactly when the assignment period (tenure) KAP limited. KAP relationships - clients continue to be extended

constantly, will bring jobs to be too routine audit, which ultimately will affect the competence. Require auditor rotation would improve audit quality because at any given time to provide a new perspective (Brody and Mascove Sumarwoto 1998 in 2009).

2.1.3 Law No. 5 of 2011 Public Accountants assume a public trust to provide an opinion on the financial statements of an entity. To protect the interests of the community over the possibility of failure in the provision of public accounting services and at the same time protecting the public accounting profession itself, we need a law that regulates public accounting profession. Until now the formation of Act No. 5 of 2011, in Indonesia there are no laws that specifically regulate public accounting profession. Existing legislation is Law No. 34 Year 1954 regarding use of Title Accountant (Accountant). The regulation of public accounting profession in Law Number 34 Year 1954 that is no longer compatible with the existing development and does not manage basic things in the public accounting profession. In Law No. 5 of 2011 regulates public accounting profession, one of which exclusive rights are owned by the Certified Public Accountants, the insurance services that can only be performed by Certified Public Accountants. The definition of "insurance" is a public accounting services that aim to provide

confidence for the user on the results of the evaluation or measurement of financial and non-financial information based on a criterion. In order protection and legal certainty for public accounting profession, also set the expiration criminal charges and a lawsuit against Public Accountants. In addition to organizing public accounting profession, Law Firm also set which is a forum for public accounting in providing professional services. The essential thing about setting such as the licensing KAP KAP KAP and establishment. One of the requirements is to have a business license KAP design quality control system so as to ensure that professional engagements conducted in accordance with the SPAP. Meanwhile, the regulation on the firm establishment intended to match the characteristics of the public accounting profession, namely independence and professional responsibilities

of public accountants on the results of his work.

2.1.4 Regulation of the Minister of Finance of the Republic of Indonesia Number 17/PMK.01/2008 about "public accounting services" chapter 3 In Indonesia there are regulations governing auditor rotation. These regulations set out in the Regulation of the Minister of Finance No. 17/PMK.01/2008 article 3 of "Public Accountant Services". The regulations governing the provision of services of general audit of the financial statements of an entity by KAP longest to 6 (six) years in a row, and by a public accountant at the latest for 3 (three) years in a row. This study

use basic Minister of Finance of the Republic of Indonesia Number 17/PMK.01/2008 article 3 of the "public accounting services" because of the setting of this study is 2006-2010.

2.1.5 Substitution Management Company Agency relationship is a contract in which one or more persons (the principal) engage another person (the agent) to perform some service on their behalf and then delegate some decision-making authority to the agent (Jansen and Meckling 1976 in Wijayani 2011). Based on these arguments it can be concluded that the konrak between principle and agent in this case the shareholders and management company, is a form of agreement whereby employers give full trust and responsibility to the management to manage the company. Substitution management company can be followed by policy changes in the areas of accounting, finance, and the selection of a public accounting firm. New management may not agree with the audit fee and the quality of services provided by public accounting firms long. If the new management found that the old auditor is not in harmony with its own policies and preferences

regarding the auditor has to be used, then this situation can lead to the replacement auditor. The company will seek public accounting firm that is consistent with the accounting policies and reporting (Nagy 2005 in Sujak 2011).

Auditor switching can be caused by the turn of the new management. Damayanti and Sudarma (2007) states that the change is a change of management company directors that can be caused by making the general meeting of shareholders or directors quit because of their own accord. The existence of the new management may also be followed by policy changes in the areas of accounting, finance, and election of KAP. Management requires a higher quality auditor and able to meet the demands of a fast growing company.

2.1.6 Audit Opinion Audit opinion on an assertion is a statement issued by the auditor. Opinions should be based on the inspection carried out in accordance with the norms and the accountant examination findings. Accountant examination results contained in a report stating that whether the financial statements are presented fairly in accordance with generally accepted accounting principles. Audit opinion there are five, namely an unqualified opinion, unqualified language explanations, a qualified, unnatural opinion, and no opinion (Mulyadi, 2002). According to Mulyadi (2002) there are five basic types of audit reports issued by the auditor, namely: 1. Report containing an unqualified opinion (unqualified opinion report) Unqualified opinion given by the auditor if it did not happen

restrictions on the scope of the audit, and there are no significant

exceptions regarding the fairness and application of generally accepted accounting principles in the preparation of the financial statements, the consistency of the application of acceptable accounting principles, as well as adequate disclosure in the financial statements.

2. Report that contains a qualified opinion Certain circumstances may require that the auditor add an explanatory paragraph or other explanatory language in the audit report, but still the financial statements present fairly the financial position and results of operations of client companies. 3. Report that contains a qualified opinion (qualified opinion report) A qualified opinion given by the auditor if the client's financial statements are reasonable, but when the audit, the auditors found conditions is limited by the scope of the audit client, the auditor can not perform audit procedures to obtain important or not important information because the conditions are outside power clients and auditors, the financial statements are not prepared in accordance with generally acceptable accounting principles, or generally acceptable accounting principles used in the preparation of the financial statements are not applied consistently. 4. Reports that contain unnatural opinion (adverse opinion report) Unusual given the auditor's opinion if the client's financial statements are not prepared

by generally acceptable accounting principles that do not present fairly the financial position, results of operations, changes in equity and cash flows of client companies. 5. In the auditor's report does not express an opinion dalamanya (disclaimer of opinion report) Auditors express no opinion because the auditor is not enough to obtain evidence about the fairness of the audited financial statements, or because the

auditor is not independent in relation to the client. If the management company does not agree with the findings of the auditor proposed to be an adjustment - adjustment or disclosure, then to the state, the auditor can not give an unqualified opinion. Differences in perspective between the company's management with the auditor may occur due to the accounting method applied to the company's financial statements by auditors to deviate from generally accepted accounting principles, and should be disclosure. Therefore, the auditor is unable to provide an opinion as the company expected. This can lead to companies moving to the firm that may be able to provide an audit opinion in accordance with the company expected. Qualified opinion tend to be less favored by clients. Clients seek wherever possible to avoid having to get a qualified opinion. (Holmes, 1990: 38-39 in Sujak 2011). Management will dismiss the auditor as a form of punishment for unexpected company's opinion on the report

financial auditor and hope to get a more manageable / more pliable (Carcello and Neal, 2003, in Sujak 2011).

2.1.7 Corporate Financial Difficulties According Scwartz and Menon (in Widiawan, 2011), the company's financial difficulties as a factor affecting firms move KAP, can be viewed from two different ways, namely: 1. Uncertainty in the business companies threatened with bankruptcy can cause conditions that encourage companies to move KAP, if the company's financial difficulties correlated with factors that can encourage companies to move KAP. Such factors, among others, the company does not agree with the results of the auditor or the auditor's opinion given in the financial statements of the company is a qualified opinion, the change of the company's management, audit fee, guarantees provided auditors, and other factors that

are not identified. These factors often results in businesses being uncertain, so companies are experiencing financial difficulties tend to move KAP than healthy companies. 2. Factors influence KAP move, depending on the financial condition of the company as the first, the factors associated with KAP move on ailing companies may not be the same as the factors associated with the company's move KAP healthy.

Second, other factors depending on the relative importance of financial condition. Switching KAP on healthy firms may be motivated by factors such as other services in addition to audit services, and replacement auditor has specialized in a particular industry. At the ailing company KAP move may be influenced by factors such as audit fees, and audit reports which may cause problems in the ailing company. In times of financial trouble, it may have a conflict of interest between the auditor and the management company, which resulted in the replacement of KAP. These conflicts are the result of the application of the principle of conservatism applied auditor. Scwartz and Menon (in Widiawan, 2011) consider the potential bankruptcy of the variables that affect the replacement auditor. Potential bankruptcy is a difficult financial solvency of the company's liabilities have exceeded kekayannya. If the company's prospects do not give up hope, liquidation had to be taken. In an environment that has the potential to bankrupt the company, there is a considerable influence on the rupture between the corporate client's engagement with the public accounting firm, as a method of accounting problems, dissatisfaction with the auditor's opinion, or dissatisfaction with the performance of auditors. Later, Francis and Wilson (cited by Nasser, et al., 2006) stating that the company is insolvent and is experiencing unhealthy financial position will tend to use KAP

which has a degree of independence to improve the company's

confidence in the eyes of shareholders and creditors to reduce the risk of litigation. According Sinarwati (2010), a bankrupt company (financial difficulties) more often to move KAP than companies that do not bankrupt (no financial difficulties). Business uncertainty companies are experiencing financial difficulties can cause a condition that encourage companies to move KAP. Threats to financial hardship is also a cost that will be faced by the company. Because management is more likely to spend more time committed to avoiding bankruptcy than to make decisions to manage the company better. Sinarwati (in Wijayani 2011) claimed financial hardship in this study were measured using DER (debt to equity ratio) by dividing the value of total assets to total equity. DER rate is 100% safe. DER values that are above 100% is one indicator of the deteriorating financial condition of a company.

2.1.8 Firm Size Firm size in this study is that the size of the firm divided into two groups, namely KAP affiliated with the Big 4 and KAP is not affiliated with the Big 4. There are currently four international public accounting firm, which is better known as the big-4. In this study, an accounting firm that is a major public accounting firm is an accounting firm

public cooperation or affiliation with the big-4. The small accounting firm is a CPA firm that does not work with big-4. Office of the big-four public accounting is generally regarded as a provider of high-quality audit reports, and have a high reputation in the business environment, and will maintain its independence to defend their image. They also will maintain its independence in order to retain clients. KAP-4 is a big four accounting firm and the largest international professional services firm that specializes in auditing and consulting for private companies and trade. As for which is included in the big-4 is 1. Pricewaterhouse Coopers is affiliated with the public accounting firm

of Drs. Hadi Sutanto & Partners by the end of 2003, then in 2004 changed its affiliation with the public accounting firm Haryanto Sahari & Partners until 2008, then in 2009 changed its affiliation with the public accounting firm Tanudiredja Wibisana & Partners; 2. Deloitte Touche Tohmatsu is affiliated with a public accounting firm and Halim Mustafa Hans Tuanakotta until 2005, then in 2006 changed its affiliation with the public accounting firm of Osman Ramli Satrio and Partners, later in 2007 affiliated with Osman Bing Satria & Partners; 3. Ernst & Young is affiliated with a public accounting firm Prasetio, Sarwoko & Sandjaja until 2005; later in 2006 turned into Purwantono, Sarwoko & Sandjaja.

4. Affiliated with KPMG public accounting firm Siddharta Siddharta & Widjadja. Firm size can indicate the quality of the services rendered, it can be understood from the large number of requests to the KAP. KAP are likely to have more experience than the audit of a small accounting firm. Thus, it is estimated that compared with small KAP, KAP big better have the ability to conduct audits, so as to produce a higher quality audit. And the company will seek KAP high credibility to enhance the credibility of financial statements in the eyes of users of financial statements.

2.1.9 Percentage Changes in ROA ROA (Return on Assets) is defined as the economic profitability that measures a company's ability to generate earnings in the past, then projected into the future to see the company's ability to generate earnings in the future. ROA is obtained from the total assets (wealth) which belongs to the company after adjusting for transaction costs to fund these assets (Hanafi and Halim, 2007). According to Damayanti and Sudarma (2007) Percentage change in

ROA (Return on Assets) is one of a company's financial indicators to see the company's business prospects. The higher the percentage change in the value of the resulting ROA means the effective management of the company's assets.

ROA is a financial indicator to see the business prospects of the company. ROA measures the company's ability to utilize its assets to earn a return. ROA is the division between the after-tax net income by total assets. The higher the ROA values mean more effective the asset management company and the better the business prospects (Prastowo, 2002 in Sujak 2011). If the percentage of ROA tend to be low, the financial indicators of the company will decrease. It is caused by poor performance of auditors and of lesser quality. Companies tend to replace underperforming auditors with auditors who have performed better performance and quality to improve the company's financial condition.

Company Size Client 2.1.10 According to Saiful and Erliana (in Wijayani 2011), the size of the client company is the size of a company that can be expressed in total assets, sales and market capitalization. The greater the total assets, sales and market capitalization, the greater the size of the company. The greater the assets, the more capital invested, the more sales, the more the velocity of money and the greater the market capitalization, the greater the company is known in the community. Client companies grow into larger, more complex businesses and increase the separation between management and ownership,

KAP need to reduce agency costs (Watts and Zimmerman, 1986 in

Wijayanti 2010). In addition, because of the increased size of the client company, allowing agents also increased the number of conflicts, and this may increase the demand for quality auditor (palmrose, 1984 in Wijayanti 2010), ie a large audit firms (Big 4). Ideally, the size of the audit firm must be in accordance with the size of the client company. A mismatch between the size of a large client companies audited by small audit firms may lead to the end of the audit engagement (Hudaib and Cooke, 2005 at Nabilla, 2011), the auditor switching.

2.2 Previous Research Previous research describes the research results obtained by previous investigators associated with this study. KAP switching study has been conducted by several researchers in several countries with the study variables and different time periods. Previous researchers, among others Mardiyah (2002), Kawijaya and Juniarti (2002), Nasser et al. (2006) in Malaysia, and Sudarma Damayanti (2007), Sinarwati (2010), Suparlan and Andayani (2010), Wijayanti (2010), Wijayani (2011), Sujak (2011), and Nabilla (2011). Mardiyah doing research in 2002 in Indonesia. The dependent variable is the switch auditors and the independent variable is the change in the contract, the effectiveness of the auditor, client reputation, audit fees, client factors, factors auditor with regression analysis and model of RPA (Recursive Partitioning logarithm). Result

of this study is variable contract changes, the effectiveness of the auditor, client reputation, audit fees, client factors, factors significantly influence the auditor auditor switches. Kawijaya and Juniarti research conducted in 2002 in Indonesia. The dependent variable is the switch auditors and the independent variable is the qualified audit opinion, mergers, management changes, expansion. The result was a variable qualified audit opinion, mergers, management changes, the expansion does not affect the company made the switch auditors.

Research Nasser et al. (2006) conducted in Malaysia. At Nasser et al study, examining auditing tenure and switching behavior in environmental auditing in Malaysia for the period 1990-2000. The dependent variable used is switching auditors and the independent variable is the size of the client, the firm size, financial distress, and the growth rate of the client. The results of this study are variable size clients, the firm size, and financial distress significantly influence auditor switching. Damayanti and Sudarma study (2007) conducted in Indonesia. The dependent variable used is the company's researchers changed auditors and the independent variables are used by researchers is the turn of management, accountant opinion, audit fees, financial difficulties, the firm size, the percentage change in ROA. The results of this study and the audit fee is a variable that measures the firm has an influence on the public company in Indonesia to move KAP. Other variables, namely change of management, accountant opinion, financial difficulties

company, and the percentage change in ROA does not have an influence on public companies in Indonesia to move KAP. The most significant variable is the variable size of the firm, which is one proxy for audit quality so that it can be concluded that audit quality is an important factor affecting the company moved KAP. In addition, the audit fee variable is also significant variables as factors that affect the price suitability company's decision to make the shift KAP. Sinarwati study (2010) conducted in Indonesia. The researchers used the dependent variable is the firm changed auditors and the independent variables used are researchers going concern opinion, change management, auditor reputation, and financial distress. The results provide empirical evidence that a change of management and the only variable affecting the company's financial distress shifting public accounting firm. Andayani Suparlan and conduct research in Indonesia in 2010. The dependent variable is the transfer of public accounting firm and the independent variable is public ownership, institutional ownership, increasing the number of shares, the board of commissioners, management turnover, leverage, ROE (Return on Equity), the size of the client. The result is the

public ownership variable, increasing the number of shares, and the size of the company's clients make the shift affecting public accounting firm. Research conducted Wijayanti (2010) in Indonesia. The dependent variable is used by researchers is switching auditors and the independent variables were

Researchers used is the size of the firm, client size, client growth, financial distress, change management, audit opinion, audit fee. Results from these studies is that only the size of the firm and audit fees significantly affect the auditor switching in Indonesia. Research conducted Wijayani (2011) in Indonesia. The purpose of research is to find empirical evidence on the factors that influence auditor switching in Indonesia. The dependent variable used by the researchers is switching auditors and the independent variables are used by researchers is the turn management, audit opinion, financial distress, the percentage change in ROA, the firm size, the size of the client. The results of these studies are variable and change management significantly affects the size of the accounting firm auditor switching in Indonesia. Research conducted Sujak (2011) in Indonesia. The researchers used the dependent variable is auditor changes and the independent variables are used by researchers is the turn of management, accountant opinion, audit fees, financial difficulties, the firm size, the percentage change in ROA. The results of this study are the variables change management, audit fees, financial difficulties and the firm size significantly affect the auditor switching in Indonesia. Research conducted by Nabilla (2011) in Indonesia. The data used are listed manufacturing companies in Indonesaia Stock Exchange (IDX) during the period 2005-2009. The dependent variable is the auditor

switching and the independent variable is the size of the firm, the size of

the client company, the growth rate of the client company, the financial condition of the client and audit firm tenure. The results of the study proved that the only variables Firm size and audit tenure significantly influence the auditor switching in Indonesia. Here's a summary of the results of previous studies of the descriptions which have been outlined above:
Tabel 2.1 Penelitian Terdahulu Researchers (years) tested in the study variables Auditor Switching Significant Not Significant Mardiyah (2002) Change contract The effectiveness of the auditor client Reputation audit fee Factors Factors client auditor None Kawijaya and Juniarti (2002) No Qualified audit opinion merger Management changes Expansion Nasser et al. (2006) The size of the client Firm Size The growth rate of client financial distress Damayanti and Sudarma (2007) Audit Fees Firm size Substitution management Opinion accountant financial difficulties Percentage change in ROA Sinarwati (2010) Substitution of management Financial Distress Opinion going concern auditor reputation Suparlan and Andayani (2010) Public Ownership Increasing the number of Institutional Ownership Board of Commissioners

stock Management Substitution client size leverage ROE (Return On Equity) Wijayanti (2010) Firm Size Substitution audit management fee Opinion audit client size Growth rate of client financial distress Wijayani (2011) Substitution of management Firm size audit opinion Percentage change in ROA financial distress client size Sujak (2011) Substitution of management audit fee Financial difficulties Firm size accountants Opinion Percentage change in ROA Nabilla (2011) Audit tenure Firm size enterprise size clients Growth rate of corporate clients Source: Review of some articles.

Thinking Framework 2.1 To illustrate the influence of the independent variable on the dependent variable was composed of a theoretical framework of thinking about the factors that influence public accountant office replacement. Variable turn positive influence on succession management KAP because if there is change of management is usually followed by changes in selection policy KAP, the audit opinion variable negative effect on KAP replacement because if

enterprises already get the unqualified opinion KAP low tendency to change. Corporate financial distress variables is positive for KAP replacement because of decreased ability to pay a corporate finance / audit fees resulting tendency of enterprises to replace its high KAP. Variables measure the negative effect of substitution KAP KAP it because if firms already use KAP Big 4 and will do to KAP non big 4 it can cause negative sentiment in the eyes of the wearer's financial reports, so they tend to defend his KAP. Variable percentage change in ROA negative effect on KAP replacement because ROA is an indicator of financial condition peusahaan, the better the better its ROA business prospects and management of its assets, then if its ROA higher then his tendency to move KAP low. Client firm size variable is positive because of the larger size of the firm client requires auditors with higher quality agency to reduce the amount of conflict increases. Figure 2.1 presents the framework for the development of thought hypothesis in this study

Gambar 2.1 Kerangka Pemikiran Pergantian manajeme n

(+)

Opini audit

(-)

Kesulitan keuangan perusahaan

(+)

Penggantian Kantor Akuntan Publik

(-) Ukuran KAP (-) Persentase perubahan ROA

(+ )

Ukuran Perusahaan Klien

2.1 Hypothesis Based on the formulation of the problem, the theoretical basis, and previous research has described, then the alternative hypothesis proposed in this study are as follows:

2.1.1 Influence of the Substitution Replacement Management Firm Substitution management company can be followed by policy changes in the areas of accounting, finance, and election of KAP. In addition it is also due to management turnover decisions general meeting of shareholders or the management of their own accord to stop because shareholders must sign or replace the new management is managing director or CEO (Chief Executive Officer). The company will look for KAP in harmony with its accounting and reporting policies (Nagy, 2005 at Damayanti and Sudarma, 2007). It can be concluded that with the change of management of the company's clients have the opportunity to appoint a new auditor of a higher quality, more may be invited to work and in line with its accounting policies and reporting. If these are not met, chances are the company will replace its auditors. Based on the above statement of the first hypothesis is stated as follows: H1: Management Substitution positive effect on the KAP replacement companies in Indonesia

2.1.2 Effect of Audit Opinion on Replacement KAP Audit opinion is a statement of opinion given by the auditor in assessing the fairness of the presentation of the audited financial statements of the company. Audit opinion is also one of the basic information used by external users of financial statements as well as used as a basis for a decision to invest. If the auditor is unable to give an unqualified opinion, the company likely will move KAP clients who may be able to provide an opinion in accordance with the company expected. This is because almost all companies are not like a qualified opinion, the emergence of the opinion would reduce the credibility of the financial statements of the company in the eyes of users of financial statements that the company will avoid the emergence of a qualified opinion on their financial statements.

The hope to get a more lenient auditor / more pliable will arise when companies lay off the old auditor. Chow and Rice (in Wijayani 2011) obtain empirical evidence that the company is likely to shift the firm after receiving a qualified opinion on its financial statements. It can be concluded that the company gets a qualified opinion on the financial statements would be inclined to change its auditors and for companies that have received unqualified opinions tend to retain auditors. Based on the above statement of the second hypothesis is stated as follows:

H2: Audit opinion negatively affect the replacement of the company's accounting firm in Indonesia.

2.1.3 Influence of the Replacement Company Financial Difficulties KAP Financial difficulties experienced by companies tend to lead to the replacement of auditors and public accounting firms, it is caused by the decreased ability of financial firms that no longer have the ability to pay audit fees charged by the Firm. Schwatz and Menon (in Mardiyah 2002) hypothesized that financial difficulties will lead to management changes do auditors. These results indicate that the distress of the financial statements will lead auditor changes than those who did not experience distress financial statements. Financial pressure and uncertainty of business life that was running on the ailing company is also encouraging companies to move KAP. The potential bankruptcy of a solvency difficulties, the difficulties that occurred during the company's liabilities have exceeded asset / wealth. In an environment that has the potential to bankrupt the company, there is a considerable effect on the employment relationship breakdowns between management and the auditor that cause the company to change auditors, such as the method of accounting problems, dissatisfaction with the opinion of the auditor, or dissatisfaction with the performance of auditors. (Schwatz and Menon, 1985 in Widiawan, 2011). It can be concluded that the company is having trouble

finance will tend to make the shift KAP than healthy companies. Based on the above statement of the third hypothesis is stated as follows:

H3: Corporate Financial Difficulty positive effect on the KAP Replacement companies in Indonesia.

2.1.4 Influence of the Replacement KAP KAP Size Management and the company will search for a highly reputable accounting firm as investors and stakeholders who use financial statements more confidence in the results of the audit are issued by reputable accounting firm. This is because basically investors and users of financial statements to make a reputation as an indicator of the credibility of the auditor's financial statements. Expertise Firm is one of the attributes in the service of the KAP (Mardiyah, 2002). The presence of factors that will determine the expertise of the auditor changes by the company so that the company prefers a large accounting firm. In addition to the perception that the more expensive the cost of the services of a public accounting firm, the better and also professional services, which then it will determine the success of the client company. KAP is large (Big 4) usually have a high reputation in the business environment, and how they maintain the reputation is the way to maintain independence, so that their image in the eyes of the users of financial statements are maintained. Larger KAP also often seen as more able to maintain independence than small KAP, because of the KAP

provide services to clients in large numbers, so as to reduce their dependence on certain clients so if perusaan already using large KAP the tendency to perform less likely replacement KAP. Based on the statement above the fourth hypothesis is stated as follows: H4: Firm size negatively affect the replacement of the company's accounting firm in Indonesia.

2.1.5 Effect of Percent Change Replacement ROA on KAP

ROA (Return on Assets) is defined as the economic profitability that measures a company's ability to generate earnings in the past, then projected into the future to see the company's ability to generate earnings in the future. Percentage change in ROA (Return on Assets) is one proxy for the reputation of the client / client reputation (Mardiyah, 2002). In addition to the changes in ROA can also be used as an indicator of a company's financial condition (Kartika, 2006, in Damayanti and Sudarma, 2007). ROA is a financial indicator to see the future business prospects of the company. ROA is the division between the after-tax net income by total assets. The higher the ROA values mean more effective the asset management company and the better the business prospects in the future. If the percentage of firm ROA decreases it indicates that the performance of the client company also decreased, the business outlook in the future is also not

too good. This will encourage the management to seek a new auditor to provide unqualified opinion to hide the company's true condition. Based on the above statement fifth hypothesis is stated as follows: H5: Percentage change in ROA negatively affect the replacement of the company's accounting firm in Indonesia.

2.1.6 Influence of the Replacement Company Size Firm Clients The size of the client company is a scale that can be measured in financial terms by looking at the total assets. The larger the company's total assets that indicates the company is large, and vice versa. Because of the large companies believe can resolve the financial difficulties it faces rather than small firms. Increasingly companies grow into large companies eat the amount of the agency relationship that is created will also be increasing as well. This will make it difficult for principals to monitor and exercise control over the agent's behavior tends to maximize his personal profits compared with a profit of principal. Therefore, the situation can be overcome by using a more independent accounting firm to reduce risk. A mismatch between the size of a large client companies audited by small audit firms may lead to the end of the audit engagement

the auditor switching (Hudaib and Cooke, 2005 at Nabilla 2011). Based on the above statement sixth hypothesis is stated as follows: H6: The size of the client company has positive influence on the KAP replacement companies in Indonesia.

CHAPTER III RESEARCH METHODOLOGY

In the method described aspects of the research study will be composed of research variables, measurement of each variable, populations and samples, types and sources of data, methods of data collection, and data analysis methods. Each explanation is as follows.

3.1 Research Variables and Operational Definitions 3.1.1 Dependent Variables In this study the dependent variable used is the replacement of KAP (Switch). KAP is the replacement replacement made by the company to the auditor or public accounting firm that has audited financial statements. KAP replacement variables using dummy variables. If the company moves KAP, it is given a value of 1. Whereas if the client company is not moving KAP, it is given a value of 0.

3.1.2 Independent Variables In this study using the independent variables, ie variables that affect or are the cause of the emergence of the dependent variable (bound). Independent variables used in this study is the turn

management, audit opinion, financial difficulties, the firm size, the percentage change in ROA, and the size of the client company.

3.1.2.1 Substitution Management Substitution is the turn of the directors of the management company which is mainly caused by the decision of the general meeting of shareholders and directors quit because of their own accord. Management turnover variables using dummy variables. If there is a change in the company's board of directors then given the value 1. Whereas if there is no change in the directors of the company, it is given a value of 0 (Damayanti and Sudarma 2007 in Sinarwati 2010).

3.1.2.2 Audit Opinion Audit opinion is a statement given by an auditor on the fairness of the company's financial statements audited by him. Audit opinion variables using dummy variables. If the company received an unqualified opinion in addition to (unqualified) then given the value 1. Whereas if the client company received an unqualified opinion (unqualified), then given a value of 0 (Damayanti and Sudarma, 2007).

3.1.2.3 Corporate Financial Difficulties Corporate Financial hardship is a condition of a company that is in a state of financial distress and firms tend to switch auditors

when experiencing financial difficulties. In this study Corporate Financial Difficulties variable is proxied by the ratio of DER (Debt to Equity Ratio) refers to research conducted Sinarwati (2010); Suparlan and Andayani (2010). DER ratio in this study was calculated by comparing the total debt to total equity. This ratio describes the company's capital structure, the greater the proportion of debt used by companies, investors bear the greater risk. Thus, the higher the ratio DER showed high levels of debt to equity is low that impacts the greater burden of the company to outsiders (creditors) and under these conditions the company will experience financial distress (Suparlan and Andayani, 2010). As for how to calculate it are as follows: Total Debt DER (Debt to Equity Ratio) = ------------------Total Equity

DER ratio level is 100% safe. DER ratio above 100% is one of the indicators of deteriorating financial performance so that the company will experience financial hardship or financial distress (Wijayani, 2011). Financial distress variables using dummy variables. If the company has a DER ratio above 100%, it was given a value of 1. Meanwhile, if the company has a client DER ratio below 100%, then it is given a value of 0 (Wijayani, 2011).

3.1.2.4 Firm Size Firm size in this study is that the size of the firm divided into two groups, namely KAP affiliated with the Big Four and KAP is not affiliated with the Big Four. Firm size variables using dummy variables. If a company is audited by a Big 4 accounting firm then given the value 1. Whereas if a company audited by non-Big 4 accounting firm, then it is given a value of 0 (Sinarwati, 2010). The auditors are included in the group The Big 4 1. Deloitte Touche Tohmatsu (Deloitte) affiliated with Hans Tuanakotta & Halim Mustafa; Osman Ramli Satria & Partners; Osman Bing Satria & Partners. 2. Ernst & Young (EY) affiliated with Prasetio, Sarwoko & Sandjaja; Purwantono, Sarwoko & Sandjaja. 3. Klynveld Peat Marwick Goerdeler (KPMG) affiliated with Siddharta Siddharta & Widjaja. 4. PricewaterhouseCoopers (PwC), which is affiliated with Haryanto Sahari & Partners.

3.1.2.5 Percentage Changes in ROA (Return on Assets) Percentage change in ROA in the intensive search can be obtained by: Roat - Roat-1 ROA (Return on Assets) = ------------------------------- X 100% Roat-1

Variable percentage change in ROA is measured by descriptive statistics using pooled data. (Damayanti and Sudarma, 2007).

3.1.2.6 Client Company Size Client company size is the size of a company as measured by total assets. The greater the total assets of a company indicates that company size is large, otherwise the smaller the total assets of a company indicates that company size is small. Variable size of the client company in this study was calculated by the natural logarithm of the total assets of the company (Nasser et al., 2006, in Wijayani 2011)

3.2 Determination of Population and Sample Population and sample in this study is a manufacturing company which is listed on the Indonesia Stock Exchange (BEI) for 2006-2010. The sample selection based on purposive sampling method is a type of

sample selection is not random that the information obtained by using certain considerations or criteria. Sample criteria consisted of: 1. Registered as a public company during the period 2006-2010 2. Presenting information in the form of complete information KAP name, the name of the CEO and the audit opinion given in period t-1, total assets, TL (total liabilities), total equity, net profit after tax 3. Publish financial statements in a row during the 2006-2010 4. Have done KAP displacement. Until 2010 there were as many as 139 companies listed on the Stock Exchange as a public company, but there are 32 manufacturing companies for which data is incomplete. Of some 107 samples, over the study period there were as many as 75 manufacturing companies that do not make the shift KAP thus excluded from the sample. By using these criteria, the final number of samples obtained by 32 manufacturing companies.

3.3 Types and Sources of Data This study uses secondary data from the audited financial statements of public companies (manufacturing) in 2006 to 2010 were obtained from the Indonesian Capital Market Directory (ICMD) available at Corner BEI-Diponegoro University, and of the Stock Exchange on the official site www.idx.co.id .

3.4 Method of Data Collection Data collection methods used in this study is the documentation of the data that can be derived from the audited financial statements contained in the Indonesia Stock Exchange, either through the official website or through the BEI in www.idx.co.id BEI-Diponegoro University.

3.5 Method of Data Analysis Data analysis methods used in this research is quantitative data analysis methods. 3.5.1 Descriptive Statistics Descriptive statistics are presenting data both numerically by calculating the average value, standard deviation and maximum-minimum. Or graphically (in the form of tables or graphs) to get an overview of the data sample. 3.5.2 Research Hypothesis Testing Parameter estimation using Maximum Likehood Estimation (MLE). Ho = b1 = b2 = b3 = ... = bi = 0 b1 b2 b3 Ho ... bi 0 Null hypothesis states that the independent variable (x) has no effect on the response variables considered (in the population). Testing of the hypothesis is done by using = 5%. Decision-making rules are: 1. If the probability value (sig.) < = 5% then the alternative hypothesis is supported. 2. If the probability value (sig.)> = 5% then the alternative hypothesis is not supported

3.5.2.1 Assessing Overall Model (Overall Model Fit) Overall Model Fit aims to assess whether the model used in accordance with the observation data. Hypotheses to assess the model fit is: H0: the hypothesized model fit to the data HA: the hypothesized model does not fit with the data Of this hypothesis is clear that we will not reject the null hypothesis that the model fit

with the data. The statistics are used based on the likelihood function.

3.5.2.2 Eligibility Test Regression Model

Feasibility testing performed logistic regression model using Hosmer and Lemeshow's goodness of fit test is measured by the value of chi square.

3.5.2.3 Coefficient of Determination (R Nagelkelkre Square)

Nagelkerke's R square is a modification of the Cox and Snell coefficient to ensure that its value varies from 0 (zero) to 1 (one). This is done by dividing the value of Cox and Snell's R2 to its maximum value. Nagelkerke's R2 value can be interpreted as the value of R2 in multiple regression. Small value means the ability of the independent variables in explaining the variation in the dependent variable is very limited. Value close to one means that the independent variables provide almost all the information needed to predict the variation in the dependent variable.

3.5.2.4 Multicollinearity Test

Good regression models is regression in the absence of symptoms is a strong correlation between the independent variables. This test uses the correlation matrix between the independent variables to see the magnitude of the correlation between the independent variables.

3.5.2.5 Classification Matrix

Classification matrix shows the predictive power of the regression model to predict the likelihood of displacement KAP conducted by the company.

3.5.2.6 The Logistic Regression Model Formed The analysis used in this study is the logistic regression analysis (logistic regression), which is to see the effect of independent variables on the dependent variable it. Regression equation models were used in this study are as follows: B1CEO SWITCHt = bo + + + b2OPINI b3DER b4KAPSIZE + + + b5ROA b6LnTA + E Specification: SWITCH: switching auditors (pepindahan public accounting firm) bo: constant b1-b6: regression coefficient CEO: Substitution management.

OPINION: Audit Opinion DER: financial difficulties KAPSIZE: Firm size ROA: ROA LnTA Percentage change: the size of the client company e: residual error