Mutual Scholastic Background Between Executives and Auditors in Audit Fees Settings

Hendi Hendi; Budi Harsono; Novi Novi

doi:10.32534/jv.v21i1.8348

Authors

Hendi Hendi Prodi Akutansi, Universitas Internasional Batam
Budi Harsono Prodi Akutansi, Universitas Internasional Batam
Novi Novi Prodi Akutansi, Universitas Internasional Batam

DOI:

https://doi.org/10.32534/jv.v21i1.8348

Keywords:

Audit Fees, Relational Embeddedness, Educational Ties, Auditor Relationshi, Chief Financial Officers

Abstract

This study investigates how social connections between senior executives particularly chief executive officers (CEOs) and chief financial officers (CFOs), audit committee (ACs) and external auditors, stemming from shared educational backgrounds, influence the determination of audit fee in Indonesian listed firms. Audit fees are used as a proxy for audit effort and risk assessment. By situating the analysis within Indonesia’s relationship-based institutional context, this study contributes to the literature on auditor and client relationships and audit pricing in emerging markets. Utilizing panel data from 110 firms over the 2019–2023 period, the analysis applies descriptive statistics, Pearson correlation, and multiple regression techniques. The findings indicate that educational ties between CFOs and auditors have a positive and significant effect on audit fees, while CEO, audit committee and auditor ties are insignificant. These effects are more pronounced in firms audited by Big Four networks and in larger, better-performing companies. The results underscore that educational based relational embeddedness influences audit pricing behavior in emerging market.

References

Akhtar, N., Alharthi, M. F., & Khan, M. S. (2024). Mitigating Multicollinearity in Regression: A Study on Improved Ridge Estimators. Mathematics, 12(19), 3027. https://doi.org/10.3390/math12193027

Alinaghian, L., Kim, Y., & Srai, J. (2020a). A relational embeddedness perspective on dynamic capabilities: A grounded investigation of buyer-supplier routines. Industrial Marketing Management, 85, 110–125. https://doi.org/10.1016/j.indmarman.2019.10.003

Alinaghian, L., Kim, Y., & Srai, J. (2020b). A relational embeddedness perspective on dynamic capabilities: A grounded investigation of buyer-supplier routines. Industrial Marketing Management, 85, 110–125. https://doi.org/10.1016/j.indmarman.2019.10.003

Audit Analytics. (2023). Audit Analytics. https://www.sec.gov/corpfin/secg-accelerated-filer-and-large-accelerated-filer-definitions

Bhaskar, R., Li, P., Bansal, S., & Kumar, S. (2023). A new insight on CEO characteristics and corporate social responsibility (CSR): A meta-analytical review. International Review of Financial Analysis, 89, 102815. https://doi.org/10.1016/j.irfa.2023.102815

Cardinaels, E., Khoo, E. S., Kuang, Y. F., Lee, G., & Qin, B. (2024). Internal and External Social Capital of Big 4 Audit Offices. Auditing: A Journal of Practice & Theory, 1–28. https://doi.org/10.2308/ajpt-2022-188

Cardinaels, E., Khoo, E. S., Kuang, Y. F., Lee, G., & Qin, B. (2025). Internal and External Social Capital of Big 4 Audit Offices. Auditing: A Journal of Practice & Theory, 44(4), 73–100. https://doi.org/10.2308/AJPT-2022-188

Chen, G., Tian, X. (Shaolee), & Yu, M. (2022). Redact to protect? Customers’ incentive to protect information and suppliers’ disclosure strategies. Journal of Accounting and Economics, 74(1). https://doi.org/10.1016/j.jacceco.2022.101490

Chowdhury, M., Prayag, G., & Patwardhan, V. (2025). The Bright and Dark Sides of the Relationship Between Relational Capital and Organizational Resilience: The Moderating Role of Human Capital. International Journal of Hospitality and Tourism Administration, 26(5), 1105–1135. https://doi.org/10.1080/15256480.2024.2400720

Christian, N., & Helvida Githa Putri Br Purba. (2023). Pengaruh Pelanggaran Perjanjian, Leverage, dan Financial Distress terhadap Audit Delay. Journal of Trends Economics and Accounting Research, 4(1), 11–19. https://doi.org/10.47065/jtear.v4i1.757

Cohen, J. R., Gaynor, L. M., Krishnamoorthy, G., & Wright, A. M. (2022). The effects of audit committee ties and industry expertise on investor judgments—Extending Source Credibility Theory. Accounting, Organizations and Society, 102. https://doi.org/10.1016/j.aos.2022.101352

Costa, M. D., & Habib, A. (2023). Local creative culture and audit fees. The British Accounting Review, 55(2), 101151. https://doi.org/10.1016/j.bar.2022.101151

DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of accounting and economics, 3(3), 183-199. https://doi.org/10.1016/0165-4101(81)90002-1

DeFond, M., Li, Z., Wong, T. J., & Wu, K. (2024a). Competence vs. Independence: Auditors’ connections with members of their clients’ business community. Journal of Accounting and Economics, 78(1). https://doi.org/10.1016/j.jacceco.2024.101702

DeFond, M., Li, Z., Wong, T. J., & Wu, K. (2024b). Competence vs. Independence: Auditors’ connections with members of their clients’ business community. Journal of Accounting and Economics, 78(1), 101702. https://doi.org/10.1016/j.jacceco.2024.101702

DeFond, M., & Zhang, J. (2014). A review of archival auditing research. Journal of accounting and economics, 58(2-3), 275-326. https://doi.org/10.1016/j.jacceco.2014.09.002

Deng, C., Gulseren, D., Isola, C., Grocutt, K., & Turner, N. (2023). Transformational leadership effectiveness: an evidence-based primer. Human Resource Development International, 26(5), 627-641. https://doi.org/10.1080/13678868.2022.2135938

Dewi, S., Halim, J., Supriyanto, S., Karjantoro, H., & Hendi, H. (2025). The impact of audit committee and audit partner tenure on tax avoidance in banking. Jurnal Akuntansi & Auditing Indonesia, 79–90. https://doi.org/10.20885/jaai.vol29.iss1.art7

Fidiana, F., Yani, P., & Suryaningrum, D. H. (2023a). Corporate going-concern report in early pandemic situation: Evidence from Indonesia. Heliyon, 9(4). https://doi.org/10.1016/j.heliyon.2023.e15138

Fidiana, F., Yani, P., & Suryaningrum, D. H. (2023b). Corporate going-concern report in early pandemic situation: Evidence from Indonesia. Heliyon, 9(4), e15138. https://doi.org/10.1016/j.heliyon.2023.e15138

Francis, J. R., & Krishnan, J. (1999). Accounting accruals and auditor reporting conservatism. Contemporary accounting research, 16(1), 135-165. https://doi.org/10.1111/j.1911-3846.1999.tb00577.x

Guan, Y., Su, L. N., Wu, D., & Yang, Z. (2016). Do school ties between auditors and client executives influence audit outcomes?. Journal of accounting and economics, 61(2-3), 506-525. https://doi.org/10.1016/j.jacceco.2015.09.003

Gul, F. A., Chen, C. J., & Tsui, J. S. (2003). Discretionary accounting accruals, managers' incentives, and audit fees. Contemporary accounting research, 20(3), 441-464. https://doi.org/10.1506/686E-NF2J-73X6-G540

Harymawan, I., Sani, N., Minanurohman, A., & Shafie, R. (2024). School ties between external auditors and audit committee: evidence from the audit fee in Indonesia. Journal of Accounting in Emerging Economies. https://doi.org/10.1108/JAEE-09-2022-0257

Harymawan, I., Sani, N., Minanurohman, A., & Shafie, R. (2025). School ties between external auditors and audit committee: evidence from the audit fee in Indonesia. Journal of Accounting in Emerging Economies, 15(1), 106–137. https://doi.org/10.1108/JAEE-09-2022-0257

Hay, D. C., Knechel, W. R., & Wong, N. (2006). Audit fees: A meta‐analysis of the effect of supply and demand attributes. Contemporary accounting research, 23(1), 141-191. https://doi.org/10.1506/4XR4-KT5V-E8CN-91GX

Hendi and Sherly. (2024). Program Studi Akuntansi, Fakultas Bisnis, Universitas Kristen Maranatha. In Jurnal Akuntansi (Vol. 16, Number 1). http://journal.maranatha.edu41

Hendi, H., & Sitorus, R. (2023). An Empirical Research on Audit Report Timeliness. Jurnal Akuntansi Dan Keuangan, 25(1), 39–53. https://doi.org/10.9744/jak.25.1.39-53

Itan, I., Diaz Hilrian, R., & Ramadana, M. (2025). The Role Of Board Composition On ESG Disclosure: An Analytical Study In Indonesia. https://doi.org/10.33395/owner.v9i4.2817

Ji, M., & Jiang, L. (2022). Aggressive CEOs and bank mergers and acquisitions. Journal of Contemporary Accounting & Economics, 18(3), 100318. https://doi.org/10.1016/j.jcae.2022.100318

Jiang, J., Fagan, C. T., & Hughen, L. (2024). CFO Compensation and Audit Fees. Journal of Risk and Financial Management, 17(11). https://doi.org/10.3390/jrfm17110476

Kristensen, T. S., Borritz, M., Villadsen, E., & Christensen, K. B. (2005). The Copenhagen Burnout Inventory: A new tool for the assessment of burnout. Work & stress, 19(3), 192-207. https://doi.org/10.1080/02678370500297720

Lashitew, A. A., & van Tulder, R. (2020). The limits and promises of embeddedness as a strategy for social value creation. Critical Perspectives on International Business, 16(1), 100–115. https://doi.org/10.1108/cpoib-02-2018-0021

Lee, J. E. (2018). Internal control deficiencies and audit pricing: evidence from initial public offerings. Accounting & Finance, 58(4), 1201–1229. https://doi.org/10.1111/acfi.12241

Mazza, T., Azzali, S., & Simonov, A. (2023). Audit fee premium for national and local level of industry expertise in Italy. Managerial Auditing Journal, 38(2), 129–157. https://doi.org/10.1108/MAJ-05-2021-3146

Mintah, R., Bekoe, R. A., & Owusu, G. M. Y. (2025). The interplay of sociocultural determinants and internal audit activities in mitigating public sector fraud. Journal of Accounting in Emerging Economies. https://doi.org/10.1108/JAEE-04-2024-0162

Nasih, M., Soeprajitno, R. R. W. N., Harymawan, I., & Nowland, J. (2023a). Top Company Officers and Auditor School-ties on Audit Fee: Evidence From Indonesia. SAGE Open, 13(4). https://doi.org/10.1177/21582440231209632

Nasih, M., Soeprajitno, R. R. W. N., Harymawan, I., & Nowland, J. (2023b). Top Company Officers and Auditor School-ties on Audit Fee: Evidence From Indonesia. Sage Open, 13(4). https://doi.org/10.1177/21582440231209632

Nasih, M., Soeprajitno, R. R. W. N., Harymawan, I., & Nowland, J. (2023c). Top Company Officers and Auditor School-ties on Audit Fee: Evidence From Indonesia. SAGE Open, 13(4). https://doi.org/10.1177/21582440231209632

Nerantzidis, M., Koutoupis, A., Drogalas, G., Vadasi, C., & Mitskinis, D. (2023a). Impact of the audit committee on audit fees: A review and future research agenda. In Cogent Business and Management (Vol. 10, Number 2). Cogent OA. https://doi.org/10.1080/23311975.2023.2238976

Nerantzidis, M., Koutoupis, A., Drogalas, G., Vadasi, C., & Mitskinis, D. (2023b). Impact of the audit committee on audit fees: A review and future research agenda. Cogent Business & Management, 10(2). https://doi.org/10.1080/23311975.2023.2238976

POJK No. 30 Tahun 2023 tentang Pengomunikasian Hal Audit Utama (Key Audit Matters). https://jurnal.usk.ac.id/JDAB/article/view/40002

Qi, C. R., Yi, L., Su, H., & Guibas, L. J. (2017). Pointnet++: Deep hierarchical feature learning on point sets in a metric space. Advances in neural information processing systems, 30. https://doi.org/10.48550/arXiv.1706.02413

Rahaman, M. M., Karim, M. R., & Sobhan, R. (2025a). Does auditor–client geographic proximity matter? New evidence from an emerging market. Journal of Accounting and Organizational Change, 21(7), 29–55. https://doi.org/10.1108/JAOC-10-2024-0352

Rahaman, M. M., Karim, Md. R., & Sobhan, R. (2025b). Does auditor–client geographic proximity matter? New evidence from an emerging market. Journal of Accounting & Organizational Change, 21(7), 29–55. https://doi.org/10.1108/JAOC-10-2024-0352

Rizal, R. M., & Sarundayang, J. I. (2023). Determinants of audit fees in the consumer goods industry listed on the Indonesia stock exchange. International Journal of Research in Business and Social Science (2147- 4478), 12(9), 313–326. https://doi.org/10.20525/ijrbs.v12i9.3052

Sharma, D. S., Singh, M. K., & Patel, A. (2022). Do Alma Mater Ties Between the Auditor and Audit Committee Affect Audit Quality?*. Contemporary Accounting Research, 39(1), 371–403. https://doi.org/10.1111/1911-3846.12730

Sharma, S., Sharma, V., & Chatterjee, S. (2021). Microplastics in the Mediterranean Sea: sources, pollution intensity, sea health, and regulatory policies. Frontiers in Marine Science, 8, 634934. https://doi.org/10.3389/fmars.2021.634934

Simunic, D. A. (1980). The Pricing of Audit Services: Theory and Evidence. Journal of Accounting Research, 18(1), 161. https://doi.org/10.2307/2490397

Soepriyanto, G., Kristi, Y., & Setiawan, J. (2025a). Audit fees during the COVID-19 pandemic: empirical evidence from financial sector firms in Indonesia. Asian Journal of Accounting Research, 10(4), 384–398. https://doi.org/10.1108/AJAR-01-2024-0043

Soepriyanto, G., Kristi, Y., & Setiawan, J. (2025b). Audit fees during the COVID-19 pandemic: empirical evidence from financial sector firms in Indonesia. Asian Journal of Accounting Research. https://doi.org/10.1108/AJAR-01-2024-0043

Susanto, A. (2021). ANALISIS PENGARUH TATA KELOLA PERUSAHAAN DAN KARAKTERISTIK PERUSAHAAN TERHADAP PEMILIHAN AUDITOR PADA PERUSAHAAN YANG TERDAFTAR DI BURSA EFEK INDONESIA. In Global Financial Accounting Journal (Vol. 05, Number 02). https://doi.org/10.37253/gfa.v5i2.6074

Vincent Konadu Tawiah. (2022). Does the impact of IFRS on audit fees differ between early and late adopters?

Wahyuni, W., Sueny, L. N. R., Wahyu, A. S., & Fadewa, N. N. (2024). Examining Audit Fee Determinants and Their Impact on Audit Quality. Advances in Managerial Auditing Research, 2(3). https://doi.org/10.60079/amar.v2i3.373

Wang, Y., Chen, X., & Zhang, Y. (2025a). Do alumni relationships between executive directors and auditors matter for financial reporting quality? Accounting Forum, 49(2), 395–423. https://doi.org/10.1080/01559982.2023.2286561

Wang, Y., Chen, X., & Zhang, Y. (2025b). Do alumni relationships between executive directors and auditors matter for financial reporting quality? Accounting Forum, 49(2), 395–423. https://doi.org/10.1080/01559982.2023.2286561

Wigren-Kristoferson, C., Brundin, E., Hellerstedt, K., Stevenson, A., & Aggestam, M. (2022a). Rethinking embeddedness: a review and research agenda. Entrepreneurship and Regional Development, 34(1–2), 32–56. https://doi.org/10.1080/08985626.2021.2021298

Wigren-Kristoferson, C., Brundin, E., Hellerstedt, K., Stevenson, A., & Aggestam, M. (2022b). Rethinking embeddedness: a review and research agenda. Entrepreneurship & Regional Development, 34(1–2), 32–56. https://doi.org/10.1080/08985626.2021.2021298

Xiao, T., Geng, C., & Yuan, C. (2020). How audit effort affects audit quality: An audit process and audit output perspective. China journal of accounting research, 13(1), 109-127. https://doi.org/10.1016/j.cjar.2020.02.002

Xiong, X., Zheng, R., Liu, Y. J., & Huang, X. (2024). International accounting network memberships and audit fees: Evidence from China. PLoS ONE, 19(1 January). https://doi.org/10.1371/journal.pone.0296304

Xue, B., & O’Sullivan, N. (2023). The determinants of audit fees in the alternative investment market (Aim) in the UK: Evidence on the impact of risk, corporate governance and auditor size. Journal of International Accounting, Auditing and Taxation, 50. https://doi.org/10.1016/j.intaccaudtax.2023.100523

Yuan, S., Zhang, W., & Zhu, K. (2023a). Place attachment, audit pricing and audit quality. Journal of Contemporary Accounting and Economics, 19(2). https://doi.org/10.1016/j.jcae.2023.100365

Yuan, S., Zhang, W., & Zhu, K. (2023b). Place attachment, audit pricing and audit quality. Journal of Contemporary Accounting & Economics, 19(2), 100365. https://doi.org/10.1016/j.jcae.2023.100365