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Effect of Earnings Management on Audit Fee

Navigasi - According to the principal agency theory, giving trust to shareholders, owners or other interested parties requires quality financial reports. Agency theory arises when the auditor is contracted by the company to work to ensure that the financial statements are presented in accordance with generally accepted principles and of good quality.

Effect of Earnings Management on Audit Fee
Effect of Earnings Management on Audit Fee


Quality financial reports, strive for complex work complexity, so that the large work demands of the company are directly proportional to the audit fees that will be given by the company.

Earnings management practices within the scope of the company expand audit audits because management requires a higher audit assessment, so the time required will be longer (Sukaniasih & Tenaya, 2016).

Changes in the time required outside the audit planning cause changes in the hourly rate from the KAP, this situation arises from other costs outside of planning as a result of management errors, in earnings management practices, the management who wants to affect the company's profits because of the demands of the principal then management wants the auditor to provide a fairness opinion in all material matters in the annual financial statements, for changes in audit time and demands from the principal resulting in an increased audit fee given to the auditor.

Earnings management exists because the actions of company managers interfere in the process of preparing financial statements, so that stakeholders believe in the work and conditions of the company. Thus, the auditor must carry out audit procedures, in order to prove that the company is carrying out earnings management, which the auditor will write on the audit report on the company he has examined.

The fee paid by the company for auditor services is getting higher, because the auditor must maintain the company's reputation. The party trusted by investors is an independent auditor or seen from the audit report on the company, the information in the financial statements has guaranteed reliability and fairness so that it can convince investors that it can reduce the risk of earnings management. This is supported by the research presented by Prayugi (2015) which states that earnings management has an effect on audit fees.
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