Supervisory Board and Audit Quality Post Revised Code of Corporate Governance: The Case of Indonesia Listed Companies

Zaitul, Zailtul (2021) Supervisory Board and Audit Quality Post Revised Code of Corporate Governance: The Case of Indonesia Listed Companies. Supervisory Board and Audit Quality Post Revised Code of Corporate Governance: The Case of Indonesia Listed Companies.

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Abstract

Indonesia is a unique of corporate governance system. Even, Indonesia follow the Europe Continental Corporate Governance System, the appointment and dismissal of supervisory board is different compare to the common practice in Continental Europe countries, such as Nederland. Code of Corporate governance is code of conduct that should be followed by the company in order to be perceived as having been practiced the principle of corporate governance. In Indonesia, code of corporate governance has been revised in 2006. However, there is a limited study conducted post this revision in Indonesia, especially its effect in audit quality. Therefore, this study intent to investigate the effect of the supervisory board on audit quality. By using 218 companies for three years, we find that supervisory board size and age have a positively significant relationship with the audit quality as predicted by resources dependent theory. In addition, profitable, higher financial risk and large companies tend to select the higher quality of audit firm. However, this finding fail to confirm the agency theory. The finding of this study have a number of an important implication for future practice, such as the mechanism of selecting and dismissing supervisory board independent. Keyword; Corporate Governance, Supervisory Board, Audit Quality and Indonesia listed companies.

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