Audit Quality: The Role Of Audit Tenure And Audit Committee In The Construction & Material Industry In Indonesia

Abstract

This research aims to analyze the influence of audit tenure and audit committee characteristics on audit quality in companies in the construction and materials sectors listed on the Indonesia Stock Exchange (IDX). Audit quality is measured using Audit Report Lag (ARL), which represents the time difference between the fiscal year-end and the issuance date of the independent audit report, reflecting the efficiency and timeliness of the audit process. The high risk of financial reporting in this sector, combined with several cases of financial statement manipulation by state-owned construction companies in recent years, highlights the importance of strengthening governance mechanisms through external auditors and audit committees. Based on Agency Theory, this study examines how the continuity of the auditor–client relationship and the oversight capacity of the audit committee influence audit timeliness. Using panel data from 31 companies during the period 2019–2024 and applying a Fixed Effects regression model with robust estimation, the results show that audit tenure has a significant negative effect on audit report lag, indicating that longer auditor–client relationships improve audit efficiency and audit quality. In contrast, the audit committee does not exhibit a significant effect on audit quality. Furthermore, firm size and profitability are found to have a positive and significant effect on audit report lag, suggesting that larger and more profitable firms tend to experience longer audit completion due to higher operational complexity, while leverage does not show a significant influence. These findings indicate that audit quality is influenced by both governance mechanisms and firm-specific characteristics, although their effects vary across variables.