Variables Affecting Audit Hours in Indonesia
Muh. Fikri Hakiki
1
, Moh.Nasih
2
, Muslich Anshori
3
, Sri Herianingrum
4
, Sri Iswati
5
Department of Accounting, Faculty Economics and Business, Universitas Airlangga, Surabaya, Indonesia
1 2 3 4
sri.herianingrum,
5
Keywords: Accounting Expertise, Adequacy Of Internal Audit Resources, Audit Hours, Legal Expertise, Long Service
As The Head Of Internal Auditor.
Abstract: This study aims to examine some variables that affect audit hours. The population of this study is a banking
company listed on the Indonesia Stock Exchange (IDX). Sampling in this study was carried out using the
purposive sampling method. The results of this study found variables in the adequacy of internal audit
resources, Accounting expertise and legal expertise have a negative and significant effect on audit hours.
The variable relating to long service as the head of internal auditors is not proven.
1 INTRODUCTION
Within a company, the audit process does not only
depend on external auditors. There are internal
auditors employed by the company itself to conduct
internal audits. According to Gay and Simnett
(2007), cited in Singh and Newby, it was claimed
that traditionally, the internal audit function is
designed to protect corporate assets and assist in
generating accounting information that is reliable for
decision making.
The Institute of Internal Auditors (IIA) defined
an internal audit as an objective assurance activity
and an independent consultation designed to give
added value and improve a company's operations.
Internal audit practices are different in each
environment. This difference occurs because of
differences in law and culture, differences in
purpose, size, and structure of the company, and the
difference in people outside of the organization.
This research focuses on an internal company in
which the existence of internal auditors is very
important. The internal auditors’ expertise in
accounting and financial reporting, internal controls,
and audits affects the capability of internal controls
(POB, 1993). The knowledge of internal auditors
can support external auditors. Previous research has
found a positive relationship between internal audit
quality and internal auditors’ contributions to
external auditing (Abdel-khalik et al., 1983; Brown,
1983; Clark et al., 1980; Felix et al., 2001; Maletta,
1993; Schneider, 1984, 1985).
Other research on the adequacy of resources,
internal audit competence and audit hours was
conducted by Ho-Young Lee and Hyun-Young Park
(2016), in their journal "Characteristics of the
Internal Audit and External Audit Hours: Evidence
from S. Korea", mentioning that the determining
factor of the adequacy of internal audit resources is
divided into two and internal auditor competence is
divided into three. Ho-Young Lee and Hyun-Young
Park (2016) mention that each of these
characteristics refers to the higher number of internal
auditors and the large amount of compensation for
internal auditors (Higher Internal Audit
Compensation). This research also mentions internal
auditor competency related accountancy expertise,
legal expertise, and short-term internal audits (short
tenure). The fifth such characteristic associated with
the length of time is the audit hours.
The importance of internal controls within a
company has been highlighted by the Committee of
Sponsoring Organizations of the Treadway
Commission (COSO). COSO identifies risk
assessment as one of the five components of internal
control (COSO, 1992; COSO, 2013). Internal audits
have evolved from a narrow focus of surveillance to
include risk management and corporate governance
principles (Brody & Lowe, 2000; Spira & Page,
2003). Internal auditors have a key role in the risk
management of a company and their contribution to
internal control is also very influential. For example,
large-scale research conducted by Leung et al.
(2004) in the Australian Company, revealed that
most of the internal auditors’ were highly influential
194
Hakiki, M., Nasih, M., Anshori, M., Herianingrum, S. and Iswati, S.
Variables Affecting Audit Hours in Indonesia.
In Proceedings of the Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study (JCAE 2018) - Contemporary Accounting Studies in
Indonesia, pages 194-199
ISBN: 978-989-758-339-1
Copyright © 2018 by SCITEPRESS – Science and Technology Publications, Lda. All rights reserved

against risk management (74%) and internal control
(91%) as an important destination within internal
audits.
Based on the above description, relating to the
importance of resource adequacy and the
competence of internal audits against the hours in
banking companies to minimize the risk of material
misstatement, the problems in this research are:
Does the adequacy of internal audit resources affect
external audit hours? Does the internal auditors’
competence influence external audit hours?
2 LITERATURE STUDY
2.1 The Influence of the Adequacy
of Internal Audit Resources on Aud
it Hours
The function of the internal auditor can affect the
scope of work carried out by external auditors by
lowering limits and the need to carry out detailed
testing. Coordination between the function of
internal and external auditors is important because it
has the potential to increase the economic value,
efficiency, and effectiveness of the audit activity of
the whole company.
For some companies, the internal audit function
can be arranged so it can generate sufficient
resources to assist external auditors, while for other
companies, most information regarding internal
auditing may not be available (Felix et al., 1998).
The availability of internal auditors to assist external
auditors, will affect the ability to complete audited
financial statements in a timely manner (Felix et al.,
2001). Support from an internal auditor given to an
external auditor impacts on the magnitude of audit
efficiency (Abott et al., 2012b). Also, adequate
internal audit functions may impact on the external
auditors' perceptions of the power of internal audit
functions, which could result in their low judgement
of risk levels of material misstatements. Therefore,
external auditors may regulate the situation, timing,
and extent of audit procedures to obtain greater audit
efficiency.
This research uses several available internal
audit employees as a variable to capture the resource
levels allocated to the internal audit function. When
determining the number of internal auditors, this
research considers whether employees work full or
part time. This variable has a significant effect on
the internal availability of auditors in the company.
Therefore, the availability of internal auditors to
assist external auditors may increase with the
number of internal auditors in relation to the size of
the entity.
The researcher hopes that internal audit
involvement with adequate resources can influence
external audit hours. So, the hypothesis is as
follows:
H1: The influence of internal audit resources are
adequate for audit hours.
2.2 The Influence of Internal Auditors’
Competence on Audit Hours
Competencies include capabilities, skills,
experience, attitudes, and existing knowledge. When
an auditor’s knowledge grows, it develops the
knowledge structure of an internal auditor (Badara &
Saidin, 2014).
POB (1993) states that the effectiveness of
internal audits is influenced by the expertise of
internal auditors in the areas of accounting and
financial reporting, internal control, and audits. The
knowledgeable internal auditor is more prepared to
understand the auditor's judgment and look at the
substance of disagreement between management and
the external auditor (Abbott et al., 2003). The results
of previous studies support a positive relationship
between the quality of internal audits and the
internal auditor's contribution to external auditing
(Abdel-khalik et al., 1983; Brown, 1983; Clark et al.,
1980; Felix et al., 2001; Maletta, 1993; Schneider,
1984, 1985).
This research compares the head of internal
auditors with accounting and legal expertise and
newly incorporated heads of internal auditors to gain
a level of internal auditor competence. An internal
auditor will be considered as an accounting expert if
there is evidence of an accounting field and
CPA/CPT certification or at least a certain amount
of experience in accounting. An internal auditor with
accounting expertise is expected to have knowledge
in financial reporting procedures and be proficient in
the field of auditing. This research hopes that an
internal auditor with accounting expertise can judge
the risk levels of material misstatements more
accurately and external auditors will be better able to
take advantage of internal auditor performance.
Internal auditors with accounting expertise can
potentially assist external auditors when discussing
or negotiating the issuance of audit reports to
management. In addition to raising efficiency,
internal auditors with strong accounting expertise
can influence external audit hours.
Variables Affecting Audit Hours in Indonesia
195

H2: The influence of the competence of the internal
auditor’s response to audit hours.
3 METHODOLOGY
3.1 Research Approach
This research is carried out by quantitative and
descriptive methods along with explanatory
associative research methods. Associative research
aims to determine the correlation and causal
relationships between variables (Sulistyanto, 2006,
p. 14). Associative research aims to determine the
relationship between two variables or more
(Sugiyono, 2005, p. 11).
3.2 Sample and Population Research
3.2.1 Population Research
According to Anshori and Iswati (2009, p. 92)
population is a generalized region consisting of
objects or subjects that have specific qualities and
characteristics set by researchers who will then study
them and draw conclusions. The population in this
study is a banking company listed on the Indonesia
Stock Exchange (IDX) during the period 2012–
2016.
3.2.2 Sample Research
The sample is part of the number and
characteristics possessed by the population (Anshori
& Iswati, 2009, p. 94). The sample used is taken
from the population using a purposive sampling of
banking companies listed in the BEI (Indonesia
Stock Exchange) and which published financial
reports during the period 2012–2016. The criteria
used in selecting samples are as follows:
a. banking companies consistently listed on the
Indonesia Stock Exchange (IDX) during the
period 2012–2016
b. banking companies that do not issue reports on
the IDX
c. banking companies that do not provide data on
the number of internal auditors
d. companies that do not provide internal auditor
competency data
e. selected banking companies to be sampled
during the period 2012–2016
3.3 Data Collection Procedures
Data collection procedures conducted by the
authors in this research will examine records
contained in the company's annual report as a
sample of research, including information regarding
the number of internal auditors within the company,
internal auditor competence, external auditor work
hours, and other necessary data.
3.4 Data Analysis Techniques
3.4.1 Descriptive Statistics
Descriptive statistics relate directly to data
collection and data centering measures as well as the
presentation of results regarding the data centered
size. Descriptive statistics will be used to describe
and provide a general overview of statistical
research data for each variable in the research.
Measures of central tendency of data to be used in
this research is the average value (mean), maximum
value, minimum value, and standard deviation. SPSS
will be used for processing data in this research.
4 DISCUSSION
4.1. Effect of the Adequacy of Internal
Auditors on Audit hours
Internal auditors have a different standard of
work to an external auditor. Tests that have been
carried out for internal auditors cannot be directly
used, so there is a need for retesting to minimize the
risk of material misstatement. Banking companies
that have many internal audits will certainly
minimize the external audit hours.
The adequacy of internal audits has a great
influence in determining audit hours, but to find
information about the number of internal audits is
not easy because there are many companies that are
not included in the annual report. Internal audits
based on the concept of the agency theory, including
bonding costs, which requires an agent to establish
and adhere to a mechanism that ensures that they
will act in the interests of the principal. The results
of this study based on the significance of regression
coefficients to calculate and evidence the impact of
the number of internal audits on audit hours, it can
be concluded that the number of internal audits
significantly and negatively affects audit hours.
Research conducted by Ho-Young Lee and
Hyun-Young Park (2016) shows that the number of
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
196

internal audits significantly and negatively affected
audit hours. This indicates that the number of
internal audits is considered a complementary
external audit function, which is to improve overall
corporate oversight and minimize the risk of
material misstatement. Coordination between the
functions of internal and external auditors are
important because of the potential to increase
economic value, efficiency, and effectiveness of all
activities within auditing firms. The greater
availability of internal auditors to assist external
auditors, the greater the chance of completing the
audit of financial statements on time. The strength of
complementary relationships between internal audit
function and audit hours demonstrate that strong
corporate governance indicates a higher level of
internal auditors to minimize audit hours and
promote the efficiency of financial statements.
4.2. The Effect of Internal Auditor
Competence on Audit Hours
Internal audit competency has a great influence
on the number of audit hours, but to find out
information about the number of internal auditors is
difficult because there are many companies that are
not included in the annual report. The internal audit
competencies used in this study are accounting
expertise, legal expertise, and the duration of
internal audit positions. Internal audit competency
according to Abbott et al. (2003) may be used for
defining the scope of audits and may affect the
efficiency of audit hours, but expertise in accounting
and finance courses in this study cannot contribute
to the understanding of the problem of risk and
presentation of financial statements. The expertise of
internal auditors in the form of education in
economics or accounting, requires higher levels of
insurance through further conduction of tests to
avoid risks that lead to poor audit quality, while also
allowing effective governance and environmental
controls, external auditors with more confidence in
internal controls, reliability of audit evidence, and
the efficiency of external audits to increase. The
results of this study based on the significance of the
regression coefficient is calculated to see the impact
of internal auditors on the competency of audit
hours. It can be concluded that internal audit
competency significantly and negatively affects
audit hours. Research conducted by Ho-Young Lee
and Hyun-Young Park (2016) indicates that internal
audit competency negatively affects audit hours.
This research also shows that internal audit
competency requires a higher level of assurance and
a faster retrieval of audit results, which can be
audited in a timely manner, minimizing the audit
hours.
5 CONCLUSION
Based on the results of the research discussions
that have been described, the following can be
concluded:
1) Tests and analysis indicate that the number of
internal auditors significantly and negatively
influences audit hours. These findings support
the research of Ho-Young Lee and Hyun-Young
Park (2016) and indicate that the number of
internal auditors may reduce audit hours. This is
because the number of internal auditors that
demonstrate improved corporate governance is
significant in minimizing audit hours and
receiving timely audited reports. The number of
internal audits that are relatively uniform in each
company means that the internal auditors have
different approaches to influence the decision of
the external auditor in determining audit hours.
2) The test results and analysis indicate that the
competence of internal auditors significantly and
negatively affects audit hours. These findings
support the research of Ho-Young Lee and
Hyun-Young Park, (2016) and indicate that
internal auditor competence may reduce audit
hours. This is because the competence of internal
auditors requires a higher level of assurance and
audit results need to be obtained more quickly.
The relatively uniform internal auditor
competencies demonstrate that almost all
companies require timely audit reports.
REFERENCES
Abbott, L. J., Parker, S., and Peters, G. F. (2012a). Audit
fee reductions from internal audit provided assistance:
the incremental impact of internal audit characteristics.
Contemporary Accounting Research, 29(1), 94-118.
Abbott, L. J., Parker, S., and Peters, G. F. (2012b).
Internal Audit Assistance and External
Abdel-Khalik, A. R., Snowball, D., and Wragge, J. H.
(1983). The effects of certain internal audit variables
on the planning of external audit programs. The
Accounting Review, 215-227
Agoes, Sukrisno. (2000). Auditing (Pemeriksaan
Akuntan) oleh Kantor Akuntan Publik. Edisi keempat.
Penerbit Salemba Empat
Variables Affecting Audit Hours in Indonesia
197

Anshori, Muslich dan Sri Iswati. 2009. Metodologi
Penelitian Kuantitatif. Surabaya: Universitas
Airlangga.
Arens, Alvin A. Elder, Randall J & Mark S. Beasley.
(2015). Auditing and Assurance Services: An
ntegrated Approach. 14th edition. New Jersey:
Pearson – Prentice Hall Inc.
Aryati, Titik dan Maria Theresia. 2005. Faktor-Faktor
yang Mempengaruhi Audit Delay dan Timeliness.
Media Riset Akuntansi, Auditing dan Informasi.Vol.5,
No. 3, Desember, hal 271-287.
Audit Timeliness. Auditing: A Journal of Practice &
Theory, 31(4), 3-20
Bapepam No.KEP 36/PM/2003
Boynton, W.C. & R.N. Johnson. (2006). Modern
Auditing: Assurance Services and the Integrity of
Financial Reporting, 8th Edition. New York: John
Wiley & Sons. Inc
Brown, P. R. (1983). Independent auditor judgment in the
evaluation of internal audit functions. Journal of
Accounting Research, 21(2), 444-455
Brody, R. G., and Lowe, D. J. (2000). The new role of the
internal auditor: Implications for internal auditor
objectivity. International Journal of Auditing, 4(2),
169-176.
Committee of Sponsoring Organizations of the Treadway
Commission. (COSO). (1992). Internal control—
integrated framework (COSO Report).
Committee of Sponsoring Organizations of the Treadway
Commission. (COSO). (2013). Internal control
integrated framework executive summary
Donald, R., Deir Jr., and Gary Giroux. (1996). The Effect
of Auditor Changes on Audit Fees, Audit Hours, and
Audit Quality. Journal of Accounting and Public
Policy, 15, 55-76.
Efendy, M. T. 2010. Pengaruh Kompetensi Independensi
dan Motivasi terhadap Kualitas Audit Aparat
Inspektorat dalam Pengawasan Keuangan Daerah.
Felix Jr, W. L., and Gramling, A. A. (2001). The
contribution of internal audit as a determinant of
external audit fees and factors influencing this
contribution. Journal of Accounting Research, 39(3),
513-534.
Felix, W. L., Gramling, A. A., and Maletta, M. J. (1998).
Coordinating total audit coverage, The relationship
between internal and external auditors. Institute of
Internal Auditors Research Foundation
Ghozali, Imam. 2006. Aplikasi Analisis Multivariate
dengan Program SPSS. Semarang: Badan Penerbit
Universitas Diponegoro
Ho-Young Lee Hyun-Young Park, (2016),"Characteristics
of the Internal Audit and External Audit Hours:
Evidence from S.Korea", Managerial Auditing
Journal, Vol. 31 Iss 6/7 pp.
Indriasari, Desi dan Ertambang Nahartyo. (2008).
“Pengaruh Kapasitas Sumberdaya Manusia,
Pemanfaatan Teknologi Informasi, Dan Pengendalian
Intern Akuvntansi Terhadap Nilai Informasi Pelaporan
Keuangan Pemerintah Daerah (Studi Pada Pemerintah
Kota Palembang dan Kabupaten Ogan Ilir)”.
Pontianak: Simposium Nasional Akuntansi XI.
International Standard on Auditing (ISA) No. 315.
Identifying and Assessing the Risks of Material
Misstatement Through Understanding the Entity and
Its Environment.
International Auditing and Assurance Standards Board
(IAASB).
Jensen, Michael C, & Meckling, William H. (1976).
Theory of The Firm: Managerial Behavior, Agency
Costs and Ownership Structure. Journal of Financial
Economics 3(4): 305-360
Kumaat, Valery G. (2011). Intern Audit. Jakarta: Penerbit
Erlangga
Lastanti, H. S. 2005. Tinjauan terhadap Kompetensi dan
Independensi Akuntan Publik: Refleksi Atas Skandal
Keuangan. Media Riset Akuntansi, Auditing, dan
Informasi.
Leung, P., Cooper, B.J. and Robertson, P. (2004). The
Role of Internal Audit in Corporate Governance and
Management. RMIT Publishing: Melbourne.
Linting, I. 2011. Pengaruh Kompetensi, Objektivitas,
Independensi, dan Kinerja Auditor Internal terhadap
Kualitas Audit pada BRI Inspektorat Makassar.
Maletta, M. J. (1993). An examination of auditors'
decisions to use internal auditors as assistants: The
effect of inherent risk. Contemporary Accounting
Research, 9(2), 508-525
Mulyadi. (2010). Auditing Buku 2. Edisi keenam. Jakarta:
Salemba Empat.
Myojung Cho, Eunsun Ki, and Soo Young Kwon. (2015).
The Effects of Accruals Quality on Audit Hours and
Audit Fees. Journal of Accounting. Auditing &
Finance 1–29
O'Keefe, T. B., Simunic, D. A., and Stein, M. T. (1994).
The production of audit services: Evidence from a
major public accounting firm. Journal of Accounting
Research, 32(2), 241-261Hours, and
Public Oversight Board (POB). (1993). In the public
interest: A special report by the public oversight
board of the SEC practice section, AICPA. Stamford,
CT: POB.
Sugiyono. (2012). Metodologi Penelitian Kuantitatif
Kualitatif dan R &D. Bandung: ALFABETA.
Sugiyono. (2014). Metode Penelitian Pendidikan:
Pendekatan Kuantitaif, Kualitatif dan R&D. Bandung:
ALFABETA
Statements on Auditing Standards No. 65. The auditors'
consideration of the internal audit function in an audit
of financial statements. American Institute of Certified
Public Accountants (AICPA).
Stephen Ojuka, Ojua Michael, Ogundana Oyebezi, Nwaze
Chukwu (2015). Internal Audit Characteristics and
Quality of Information Accounting in Nigeria.
Schneider, A. (1984). Modeling external auditors'
evaluations of internal auditing. Journal of Accounting
Research, 22(2), 657-678.
Schneider, A. (1985). The reliance of external auditors on
the internal audit function. Journal of Accounting
Research, 23(2), 911-919.
JCAE Symposium 2018 – Journal of Contemporary Accounting and Economics Symposium 2018 on Special Session for Indonesian Study
198

Suraida, I. 2005. Uji Model Etika, Kompetensi,
Pengalaman Audit dan Risiko Audit terhadap
Skeptisisme Profesional Auditor. Jurnal Akuntansi
Undang-Undang Republik Indonesia nomor 5 tahun 2011
pasal 4 tentang Akuntan Publik.
Utami, Wiwik. 2006. Analisis Determinan Audit Delay
Kajian Empiris di Bursa Efek Jakarta. Bulletin
Penelitian. No. 09, hal 1-14.
Widyaningdyah, Agnes. (2001). Analisis Faktor-faktor
Yang Berpengaruh Terhadap Earnings Management
Pada Perusahaan Go Public di Indonesia. Jurnal
Akuntansi & Keuangan. November Vol. 3 No. 2.
Zain, M.M. (2006). Internal Auditors Assessment of Their
Contribution to Financial Statement Audits: The
Relation With Audit Committee and Internal Audit
Function Characteristics. International Journals of
Auditing, Vol.10, No,1, pp. 1-18, March 2006
Variables Affecting Audit Hours in Indonesia
199