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VOLATIUTY REVELATlON BETWEEN CRYPTO CURRENCY WITH DIFFERENT DEVELOPING AND EMERGING STOCK MARKET
KirtiArekar, Rinku Jain, Surender Kumar _ ··---_3
THE IMPACT OF MARKET ORIENTED AND CAPABILITIES RESOURCES IN CUSTOMER VALUE ON SME'sOF STARFRUIT: EMPIRICAL EVIDENCE STUDY IN EAST JAVA
Ditiyl BimaWlti, Bagus Nurcabyo, Lince Afriyenny ...•••.••.••.•••.•.•.•_ _ --_4 STRATEGY OF EMPLOYEE ENGAGEMENT PROGRAM FOR MILLENNlALS IN THE WORKPLACE
bchmat Setyawan ·..•.•.•••••.•·•·•••••.••••••••_.•.••- •••••••_ ---- 5 DO TRANSFORMATlONAL LEADERSHIP, INTERPERSONAL COMMUNlCA nON, AND CAREER DEVELOPMENT HAVE DIRECT AND INDIRECT EFFECT ON DIPLOMATS' ORGANIZATIONAL COMMITMENT AT THE MINlSTRY OF FOREIGN AFFAIRS REPUBLIC OF INDONESlA IN JAKARTA?
Asr.rudia._ _._ _..6
BUSINESS TRANSFORMATlON: PERSPECTIVE OF HUMAN RESOURCE MANAGEMENT (STUDY CASE: PT. NUSANTARA CARD SEMEST A)
Satnl lndadzi FadbUlb _._ 7
DETERMINING FACTORS OF BANK PEMBANGUNAN DAERAH (BPD) EFFICIENCY IN INDONESIA
Sulatmln Rahman Nidar, Mokhamad Anwar, Ratna Komlra, LayyinaturrobaniYlb ..._.••.-._.8 THE EFFECT OF ELECTRONIC WORD-OF-MOUTH TOWARDS THE EQUITY OF
PRESIDENTIALCANDIDATES IN 2019 ELECTION ON MILLENNIAL VOTERS
Mlyzurl Ghllslnl, Firmanzlh _ _ _..•_..•__ 9
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( R RATE OCI L RESPONSIBILITY, STOCK SPLIT. AND CONCeN'11lATED STRlICTUltE: EVIDENCE IN INDONESIA
T"'ry Wkf~ti"l
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CYftthl. Arrlan. UI.m _ _ nllIE EFFECTS OF CORPORATE SOCIAL RESPONSlBlLlTY (CSR) ON FIRM PERFORMANCE:
nrs MEDIATING ROLE OF INNOVA nON AND TOTAL QUALITY MANAGEMENT (TQM)
Yb Tl"i.y1lJIiari ., _ __ _ __ __ ._ J3
TR ST AND COMMITMENT TOWARD MOBILE PA ¥MENT PLATFORM
OL.1)f .. ySembiriDg, Dani~1Tumpll Hamonangan Aruan 14
THE fNFLUENCE OF ORGANIZATIONAL CLIMATE AND PERSONALITY ON WORK EFFECTIVENESS THROUGH EMPLOYEE COMMITMENT AS AN INTERVENING VARIABLE
Gloria Adiada Christie .•_ _ _15
co SUMER'S BEHA VlORAL INTENTION TOWARD "GREEN" RESTAURANT
.o\daaya Tsaman Zahn _ 16
THE EFFECT OF FAMlLY OWNERSmp ON EXECUTIVE COMPENSATION: EMPIRICAL EVIDENCE FROM INOONESIA
Fnasiscu Nicbolas, Cynthia Afriani Utam _._ 17
MODELING TIIE PURCHASE DECISION AND CUSTOMER LOYALTY MECHANISM USING AGENT-BASED SIMULA nON
S~ty. Nuneni, Syafiq Mahdi Tomiputra 18
CONCEPTUALIZA nON THE ROLE OF EMPLOYEE BR.AJ~D COMMUNITY BY MILLENlAL WORKERS TOWARDS INTERNAL BRANDING
Risb Ih\iada Elsyah, An.nda Fortunisa _.19
ANAL YSIS OF COMPANY FINANCIAL PERFORMANCE BY USING THE DU PONT APPROACH AND VALUE BASED SYSTEM fN THE CIGAREITE INDUSTRY LISTED ON THE INDONESIA STOCK EXCHANGE
Dadi Rudiaato, Tri Puj.di SUlilo, M. Robby Farhan _ 20
ANALYSIS OF XYZ GROUP'S FINANCIAL PERFORMANCE LISTED ON THE INDONESIA STOCK EXCHANGE USING THE ALTMAN Z SCORE AND RATIO MODEL FINANCE
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~ Try Na.da, DanielTumpI' Hlmonlngan Aruan • ••..• 25
rus RELAnossmr AMONG PERCEIVED SUPERVISOR SUPPORT, EMPOWERING LEADERSHIP, AFFECfIVE COMMITMENT, IN-ROLE PERFORMANCE, AND EXTRA-ROLE PERFORMANCE (A CASE FROM TEACHERS AND ACADEMIC STAFF FROM DINAS PENDrDrKAN KABUPATEN MAYBRAT WEST PAPUA)
Isrtel Kambuaya, Wisnu Prajogo 26
THE INFLUENCE OF ADVERTISING APPEALS ON VIRAL ADVERTISING, BRAND AWARENESS, AND PURCHASE INTENTION (THE MODERATING ROLE OF HEDONIC PERSONALITy)
'EcliParwanto, Wisnu Prajogo _.17
THE MODERATING ROLE OF ISLAMIC WORK ETHICS IN THE RELATIONSHIP AMONG JOB STRESS, WORK COMMITMENT, TURNOVER INTENTION, AND WORK PERFORMANCE (A CASE FROM WAROENG STEAK AND SHAKE)
DwiM ll.rIlIYati,• . Miswanto _ 18
lMPACf OF COMPETENCY, KNOWLEDGE, SATISFACTION, MOTIVATION TOWARDS PERFORMANCE OF MUSEUM TECHNICAL STAFF IN INDONESIA
Mullammad Natsir Ridwan Muslim
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19 STATUS DEMOTION IN LOYALTY PROGRAM: STRATEGY FOR CLOSE TO THE THRESHOLD CUSTOMERSAltamim Mlrie 19amo, AdiZakaria Aliff 30
TAX PAYER BEHAVIOUR AND TAX EVASION IN INDONESIA
NIU'Dia.1
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31SOCIAL RESPONSIBILITY DISCLOSURE MODEL OF PUBLIC COMPANIES IN INDONESIA M. ChoUd MI",.rdi, MI.licbab...••••...••.•....•....•..•...•...••.••••••••.•••..••.._•..•.•.•.•.••.••.•••..•.•..••...31
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~ FESSrO AUSM OF SATPOL PP MEMBERS IN THE REGION OF DlCl JAKARTA
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f1JhRFI ATIONSlIlP AMONO ~BRVlt n (.)IJALlTY, "RANI) TRUST, flRA~~) PRI!Jfl!RI!NCE, AND INTfiN1ION 1'0 UUY (A CASU FROM I'T SINAlt SOSJtO YO(JYAKAR I A BRANCII)
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Stptlan Bayu Krblanlo, Hernl Kurnlowall, SocbaKYo, Krllnowntl Tarlgan 47 THE ACCEPTANCE MODEL OF WHO 20 II MEDICAL EQUIPMENT MAINTENANCE SYSTEM BASED ON DIFFUSION OF INNOVATION THEORY
Bambang Jad Sentot, Rela lillmy, Hasylm Ahmlld 48
IMPACT OF ENTREPRENEURIAL ORIENTATION AND MARKET ORIENTATION IN NEW PRODUCT DEVELOPMENT
Rosblansyah Perdana Kusuma, Lily Sudhartio · ··..··..· ·..···· ..•· •• · •• 49 EFFECTIVENESS OF SUPERVISION AND COMPANY RISK ON AUDIT FEES. (COMPANIES LISTED ON INDONESlA AND MALAYSIA STOCK EXCHANGES)
Indira Januard, Alif Rldlky Kurniawan, Darsono, Anls Charlrl 50 THE FINANCIAL AND NON· FINANCIAL INFORMATION DIRECTIVE: AN INVESTOR ASSESSMENT TO STOCK PRJCE (EXPER IMENT AL STUDY)
Monica Rah.rdian Ary Helmina, Imam Ghozali, Jaka Isglyarta, Ibnu Sutomo 51 PENGARUH KEPEMIMPINAN DAN KOMPENSASI TERHADAP KINERJA MELALUI KEPUASAN KERJA SEBAGAI VARJABEL INTERVENING
Harum Tri Mallnd •... 51 KEBERAGAMAN GENDER AUDIT KOMITE DENGAN EARNINGS MANAGEMENT
YuHusJogi Christlawan, Saarce EIsye Hatane, Egan Silvanest Liang, Hugo Alvin Djakarla .... 53 EFFECT OF ETHICAL BEHAVIOR ON COMMITMENTS IN ASSIGNMENTS
Hery Subowo, T.unq Suprladl, Bahrullah Akbar, Dedy Purwana, H.mldah 54 IDENTIFICATION OF DISTRIBUTION CHANNELS THE SUPPLY CHAIN OF RICE, CHiLi, ONION, BEEF, CHJCKEN IN DEPOK CITY
Bambln& Hermanto, Sri Setl.wltl, Isnllnl HJjriyah Kurni.sari 55
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N.rt..Id.h , , " , SI
TRAN!'FORMATlON IS RBQUIRED TO HANGS rus ECONOMIC SYSrllM OF THE SUBSY T M, BASED ON ADDfiD VALun AND rOMPETITlvnNESS
8..YaU.rto N.l"Ollo. Ferdln.nd D.S.nglh. John P. K.un.na S9 EFFECT OF BRAND AWARENI1SS, PRODUCT QUALITY, PRICE, AND DISTRIBUTION
'IIANNELS TO PURCHASE DECISION AMIDIS BRAND BOTILED WATER (AMOK) PRODUCT
0'1""1. Slmanjuntak, Fr.nky , , , , 60
THE EFFECt' OF WORKPLACE SPIRITUALITY, WORK CLIMATE AND COMPENSATION ON EMPLOYEE PERFORMANCE AT PT XYZ
Mllhammad Rna Rizky Ananda, Finny l\tlrtdlanty 61
xiv
1 EFFECTIVENESS OF SUPERVISION AND COMPANY RISK ON AUDIT FEES.
(COMPANIES LISTED ON INDONESIA AND MALAYSIA STOCK EXCHANGES)
Indira Januarti1*, Alif Ridzky Kurniawan2, Darsono3, Anis Chariri4
1,2,3,4 Accounting Department, Faculty of Economics and Business, Universitas Diponegoro
Abstract
Financial statements of listed companies are mandatory to be audited by an external auditor.
Function of audit is to check the financial statements are presented in accordance with financial accounting standards. It is part of supervision and will reduce risks of stakeholders in term of misappropriate of financial statements. Strict supervision of concentrated ownership and multinational affiliation demands a high audit quality. In effect, audit fees are increase because of the choice of reputable auditor. High company risk as a factor of increasing audit fees. The purpose of this study is to examine and provide empirical evidence of the effect of ownership structure, multinational ownership affiliates, and number of subsidiaries on audit fees. The sample of 340 companies listed on the Indonesia and Malaysia Stock Exchanges in 2017. The analysis tool uses multiple linear regression. The result shows that the number of subsidiaries and multinational ownership affiliates has a significant positive effect on audit fees, while the ownership structure hasn’t positive effect on audit fees. The implications of this study show that the determination of audit fees can be based on audit risk and quality.
Keywords: Audit fee, ownership concentration, multinational ownership affiliation, subsidiary of company.
Introduction
The purpose of the audit of the company's financial statements is to mitigate risks that occur due to conflicts between principals (owners) and agents (management) (Jensen & Meckling, 1976).
The conflict can be caused by differences in interests between owners and management. Public accountants (also called as external auditors) are independent parties who provide audit services.
Public accountants receive fees when conducting audits, commonly referred to as audit fees. The mechanism for determining the amount of audit fees is determined by the Indonesian Institute of
2 Public Accountants (IAPI), which is based on the risk that is willing to be accepted by the public accountant (IAPI, 2016).
Audit fees are an interesting object to study because disclosure of the magnitude of corporate audit fees in Indonesia is still lacking (Januarti & Wiryaningrum, 2018). More companies disclose the amount of professional fees, where professional fee is the cost of all services paid by the company to professional supporting institutions of the company including public accounting firms (KAP), Securities Administration Bureau Offices, Notaries and Legal Counsels. Therefore, disclosure of the professional fee amount in the annual report cannot be used as a reference to find out the amount of audit fees received by the KAP.
Research on audit fees is needed to guide a management and auditors identify factors that can influence the amount of audit fees. Simunic, (1980) stated that the amount of the audit fee is determined based on the size of the company, the complexity of the company's operations, the risk of the company, and the type of industry. Research on audit fees has been carried out by several researchers, including: Januarti & Wiryaningrum,(2018), Muniandy & Ali, (2012), Khan, Hossain,
& Siddiqui, (2011), Suharli & Nurlaelah, (2008), Niemi, (2005). According to Niemi, (2005) various structures of company stock ownership (e.g., concentrated ownership, foreign ownership, managerial ownership) have different effects in determining audit fees. Determination of audit fees can be seen from the scope of the assignment and assurance demand.
This study focuses on the ownership structure factor which consists of concentration ownership, multinational ownership, and business complexity because there are still few studies examining these factors. Ownership of concentration has the power to supervise management to reduce the risk of the company. Ownership of concentration requires high audit quality, therefore audit fees paid by companies are increase (Muniandy & Ali, 2012). Khan et al., (2011) provides different
3 evidence that when supervision by ownership of concentration is better, the risk becomes smaller and audit fees are decrease. The complexity of the company is illustrated by the number of subsidiaries and different business segments increasing the risk of the company. Auditors need more time and resources, as an result of that situation, audit fees are increase (Januarti &
Wiryaningrum, 2018). Multinational ownership shows a certain amount of foreign ownership.
Multinational companies are expected to produce more information than local companies.
Multinational companies must comply with disclosure rules that are stricter than their parent companies, mostly in developed countries (Ahmed & Goyal, 2005). Jaggi & Low, (2000) argues that investors who have investments at home and abroad need detailed and comprehensive information. Therefore, multinational ownership requires high qualified auditors, so that audit fees are high (Karim & Moizer,1996; Ahmed & Goyal, 2005).This study uses a sample of manufacturing companies that listed on the Indonesia and Malaysia stock exchanges. The reason for this research in these two countries is because many Asian countries have a highly concentrated shareholding structure (La Porta, Lopez, & Shleifer, 1999). Indonesia and Malaysia are equally developing countries. Companies registered in Malaysia are mostly owned by executive directors and large shareholders (Muniandy & Ali, 2012).
The purpose of this study is to examine and provide empirical evidence regarding the concentration of share ownership, multinational ownership and company risk on the decision to determine audit fees. The benefits of this research can add to the research reference for determining audit fees in terms of the ownership structure and risk of the company. The research implications show that the determination of audit fees increase because of the demand for audit quality.
4 Literature Review
Agency Theory
Agency theory is a theory that explains employment relationships where one particular party (principal) employs another party (agent) to carry out services on behalf of the principal. Some authority possessed by the principal will be delegated to the agent, so that the agent has authorities to make decisions (Jensen & Meckling, 1976). There are two problems that may occur in the agency relationship. First, the desires or goals of the principal and agent in some cases are contradictory. Second, it is difficult and expensive for the principal to verify what the agent is actually doing (Eisenhardt, 1989).
Managers as agents have a tendency to increase income from company resources for personal gain (Eisenhardt, 1989), called individual maximize. Therefore, companies need to spend agency costs as the amount of costs incurred by the principal to oversee agent performance. There are three types of agency costs (Jensen & Meckling, 1976):
1) Monitoring cost is the cost to monitor and control agent behavior.
2) Bonding costs are costs incurred by management to be able to comply and show that the agent has acted in the interests of the principal.
3) Residual loss is the cost in the form of decreasing principal welfare as a result of differences in agent decisions and principal decisions.
One form of monitoring costs is audit fees, which are costs incurred to pay for external audit services (Jensen & Meckling, 1976). External auditors as an independent party are believed to be able to provide fairness guarantees on the financial statements presented by management (agents).
This guarantee means that the agent does not take actions that can harm the interests of the principal.
5 Audit Standard 315 requires that when conducting an audit, the auditor must understand the entity and its environment (IAPI, 2013). Audit risks can arise from: (IAPI, 2013)
1) the entity and its environment include: industry factors, regulations, the nature of the entity (operations, ownership structure, governance), nature of financing, type of investment carried out, selection and application of accounting policies, objectives, strategies and business risks.
2) entity's internal control.
Hypotheses
In agency theory, it is stated that conflicts can occur between majority ownership and minorities (Jensen & Meckling, 1976). Companies with concentrated ownership will have ownership control because they have a relatively dominant number of shares. Thus, they have the ability to influence and supervise management performance. The ability of shareholders to monitor the performance of management and companies in financial accounting, reporting and disclosure practices can eliminate inherent risk (Mitra & Cready, 2005). With the inherent risk being lowered, the auditor will reduce audit process (lower effort) so that audit fees become lower.
Muniandy & Ali, (2012), Khan et al., (2011), and Mitra & Cready, (2005) found an evidence of the concentration of share ownership negatively affecting audit fees. In line with previous research, the hypothesis formulated was:
H1: Ownership concentration negatively influences audit fees
Companies with multinational affiliations will certainly have stakeholders in the form of shareholders or investors who come from domestic and abroad. In this case companies that have multinational ownership affiliations can have more complex of interests. Because companies with
6 multinational ownership affiliation need to serve the interests of a diverse group of shareholders, namely groups of shareholders from within the country and abroad with different cultural and regulatory backgrounds. A country's socio-political and economic environment influences financial disclosure through intervention variables (Jaggi & Low, 2000). More disclosure of accounting information and adjustments to disclosure of information to accounting regulations originating from countries that are affiliated with the company, therefore high-quality auditors are needed so that audit fees are increase (Ahmed & Goyal, 2005).
The subsidiaries of multinational corporations pay significantly higher audit fees and affiliates of the Big 4 international audit firms charge higher audit fees for perceived higher quality audit services in the South Asian audit market (Ahmed & Goyal, 2005). Affiliates Multinational companies pay higher audit fees than pure domestic companies in Bangladesh (Karim & Moizer, 1996). Based on that explanation and the support of previous research, the hypothesis tested is:
H2: Multinational affiliation positively influences audit fees
Subsidiary is a company that is controlled by another company (called the parent company) because part of or wholly owned by the parent company. The complexity of the company can be measured by the number of subsidiaries (subsidiary companies) both inside and outside the country (El-Gammal, 2012).
Companies with many subsidiaries indicate high risks because of the diversity of their businesses.
According to agency theory, the risk must be minimized by asking an independent party to conduct an audit (El-Gammal, 2012). Employment contracts between the parent company and subsidiaries have an impact on the complexity of audit work. Companies with a large number of subsidiaries have become more complex and have high audit risk so that they require more time in conducting the audit. A very diverse company with many subsidiaries having complex operations that require
7 a comprehensive audit by the auditor (Musah, 2017). Kikhia, (2015) states that complexity can affect hourly labor costs which ultimately affect audit costs.
The number of subsidiaries represents the complexity of structural agency relationships. The greater number of subsidiaries owned, the higher the level of risk. The auditor has the task of carrying out audits to guarantee information and reduce the level of risk, so that the audit process becomes more complex which can have an impact on audit fees (El-Gammal, 2012). Public accounting firms that receive audits for companies with large number of subsidiaries are certainly riskier than those with small subsidiaries. Therefore, in the assignment KAP tends to assign more auditors, so that the audit fees offered to the auditee become large (Januarti & Wiryaningrum, 2018).
Hasan & Naser, (2013) provides evidence that audit fees are influenced by company complexity.
That is because, the more complex the company's operations make the scope of the audit broader and the auditor takes a long time to audit. Thus, the company must pay a large audit fee. Simunic, (1980); Joshi & Hasan, (2000); Sinaga & Rachmawati, (2018); Januarti & Wiryaningrum, (2018) found a significant positive relationship between the number of subsidiaries and audit fees. Based on the explanation above and the results of previous studies, the hypothesis:
H3: Company risk has a positive effect on audit fees
Research Methods
Table 1 shows the sample in this study, which is all manufacturing companies in 2017 that include audit fees separately from other professional costs and data that can be processed in research.
8 Table 1: Sample Selection
Criteria Indonesia Malaysia N
Manufacturing companies that present audit fees
79 324 403
Outlier (15) (48) (63)
Sample 64 276 343
Table 2: Variable Measurement
Variable Measurement Code
Audit Fees Ln audit fee LNAUFEE
Ownership concentration Total ownership KKS
Multinational Dummy; 1 multinational, 0
non-multinational AP
Company risk number of subsidiaries owned AKM
The regression equation is:
AUFEE = a0 – b1KKS + b2AP + b3AKM + e Which:
UUFEE = audit fee
KKS = Total ownership
AP = multinational (1) and non-multinational company (0), dummy AKM = Company risk
e = error term.
Results and Discussion
Table 3 presents descriptive statistics. Table 3 shows that companies in Malaysia are more open in presenting audit fees, as seen in the sample of companies in Malaysia more than companies in Indonesia, which is 4.1%. The highest audit fees between companies in Indonesia and Malaysia are not much different, Indonesia is $11.75 while Malaysia is $11.80. The concentration of ownership is greater in Indonesia (96.31%). The number of subsidiaries is higher in Malaysia (14).
Majority of companies in Indonesia and Malaysia are not owned by foreigners.
Table 4 presents the multiple regression results. Asymp. Sig. 0.061. As the p-value more than 0.05, it can be concluded that the residual is normally distributed. Table 4 also displays the result of the
9 Glesjer heteroscedasticity test. The level of significance for all the independent variable is higher than 0.05, so there is no heteroscedasticity problem. The results of multicollinearity tests show that the tolerance values for all variables are far above 0.10 and all the VIF values are below 10.
Therefore, multicollinearity is not a problem in the regression model.
Table 3: Descriptive Statistic
N Minimum Maximum Mean Std.
Deviation AUFEE (US $) 340 3,692.76 132,814.62 42,801.32 28,062.26
LNAUFEE 340 8.21 11.80 10.45 0.67
KKS 340 5.08 96.31 40.14 22.01
AP 340 0.00 14.00 4.34 3.24
Valid N (listwise) 340
AKM Indonesia LNAUFEE Malaysia LNAUFEE
1 26 58,645.06 32 55,287.22
0 38 30,199.64 244 47,217.25
Amount 64 276
Indonesia
N Minimum Maximum Mean Std.
Deviation AUFEE (US $) 64 7,252.14 126,379.76 42,801.32 28,062.26
LNAUFEE 64 8.89 11.75 10.35 0.79
KKS 64 12.80 96.31 63.56 23.08
AP 64 0.00 12.00 2.09 2.41
Valid N (listwise) 64
Malaysia
N Minimum Maximum Mean Std.
Deviation AUFEE (US $) 276 3,692.76 132,814.62 4,043.92 27,385.80
LNAUFEE 276 8.21 11.80 10.47 0.64
KKS 276 5.08 74.28 37.10 17.82
AP 276 0.00 14.00 4.87 3.19
Valid N (listwise) 276
10 Table 4: Multiple Regression Result
Variable Prediction Coefficient t p- value
Multicollinearity Heterocedasticity Tolerance VIF t p-value
Constant 9.941 .000
KKS - 0.001 0.433 .666 0.904 1.106 1.650 0.100
AKM + 0.009 5.535 .000 0.894 1.118 0.072 0.943
AP + 0.499 9.123 .000 0.976 1.025 -1.170 0.243
asymp,p-value=0.061 ; Adjusted R2=0.231;F=34.972;p-value=.000;N=340
Table 4 shows the ownership concentration variable (KKS) has no negative effect. The coefficient shows positive (0.001) value of t 0.433 with p-value 0.666 greater than 5%, so H1 is rejected. The coefficient results are the opposite of what was hypothesized. Positive coefficient values indicate that the approach used in determining the audit is demand-based, where the majority shareholders tend to choose qualified auditors. Results of this study contradict the research Muniandy & Ali, (2012); Khan et al., (2011); Mitra & Cready,( 2005) which shows that ownership concentration negatively influences audit fees.
Multinational ownership has a positive effect on audit fees (coefficient = 0.009, t= 5.535, p-value 0.000), thus H2 is accepted. Companies with multinational ownership pay higher audit fees than local companies. The evidence is shown in table 3, the average audit fees of multinationals in Indonesia (58,645.06) and in Malaysia (55,287.22). Whereas audit fees for local companies in Indonesia (30,199.64) and in Malaysia (47,217.25). Companies with multinational ownership have high quality demands, so they choose reputable auditors, therefore audit fees must be paid higher than local companies. The results of this study reinforce the research Ahmed & Goyal, (2005);
Karim & Moizer, (1996). Table 3 shows that multinational ownership of companies in Indonesia is greater (63.56) than companies in Malaysia (37.10). The data shows that companies in Indonesia are more foreign-owned.
11 Company risk has a positive effect on audit fees, explained from table 4 with the coefficient value 0.499 (t =9.123; p-value = 0.00), so it is concluded that H3 is accepted. Companies with many subsidiaries have a large risk, so the auditor requires a lot of resources and a long audit time, so that the audit fees are high (Kikhia, 2015). Companies with a large number of subsidiaries choose qualified auditors to minimize the existing risks. In accordance with agency theory to minimize risk one can use qualified external supervisors (Jensen & Meckling, 1976). Table 3 shows the average subsidiary in Malaysia (4.87) more and the average audit fee is also higher (10.47).
Whereas the average subsidiary in Indonesia 2.09 with an average lower audit fee, is equal to 10.35. The results of this study support the study Simunic, (1980); Joshi & Hasan, (2000); Sinaga
& Rachmawati, (2018); Januarti & Wiryaningrum, (2018) that company risk positively influences audit fees.
Conclusions
This study examines the ownership structure (concentrated and multinational) and company risk on audit fees. The results showed that multinational ownership and company risk had a positive effect on audit fees. While the concentration of ownership has no effect on audit fees. The implication of this research is that audit fees are determined based on demand for the quality provided. In accordance with agency theory, to minimize the risk of asymmetry information required an audit by independent party.
The limitation of this study is the small adjusted R2 (23.1%). The sample of companies in Indonesia is still small compared to Malaysia. Therefore, for future research it is recommended to add the variable Public Accounting Firm (KAP), the consistency of KAP so that it requires a longer observation time.
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