The Effect of Audit Quality, Tenure Audit, And Auditor Reputation On Fraudulent Financial Reporting with Institutional Ownership As A Moderation Variable in Industrial Companies Listed on the IDX For The 2021-2025 Period

Abstract

This study aims to analyze the effect of audit quality, audit tenure, and auditor reputation on fraudulent financial reporting, with institutional ownership as a moderating variable in industrial sector companies listed on the Indonesia Stock Exchange (IDX) for the period 2021–2025. This study employs a quantitative approach using secondary data from audited financial statements and annual reports. The population consists of all industrial sector companies listed on the IDX, and purposive sampling yielded 49 companies or 245 firm-year observations. Fraudulent financial reporting is measured using the Beneish M-Score, audit quality is proxied by the natural logarithm of audit fees, audit tenure is measured by the length of the auditor-client engagement, auditor reputation is measured by a Big Four dummy variable, and institutional ownership is measured by the percentage of shares held by institutional investors. Data were analyzed using panel data regression with Moderated Regression Analysis (MRA), with model selection through the Chow Test and Hausman Test. The results show that audit quality has a significant negative effect on fraudulent financial reporting (β = -0.284, p < 0.001); audit tenure has a significant positive effect (β = 0.157, p < 0.01); auditor reputation has a significant negative effect (β = -0.312, p < 0.001); and institutional ownership significantly strengthens the negative effect of audit quality (interaction β = -0.146, p < 0.01) and weakens the positive effect of audit tenure on fraudulent financial reporting (interaction β = -0.119, p < 0.05). These findings indicate that audit quality and auditor reputation are important mechanisms for detecting and preventing fraudulent financial reporting, and this role is strengthened by the presence of institutional ownership as an external monitoring mechanism