Determinant of Audit Quality: The Role of Key Audit Matters, Audit Tenure, Audit Fees and Firm Size (Evidence From Basic Materials and Industrial Companies 2022

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Tangerang— Audit Fees Emerge as Key Driver of Audit Quality in Indonesia’s Industrial and Basic Materials Firms. The research conducted by Adeline Yolanda Claudia Cristie and Kurniawati from Bunda Mulia University, Tangerang, was published in January 2026 in the International Journal of Business and Applied Economics (IJBAE).

The research conducted by Adeline Yolanda Claudia Cristie and Kurniawati confirms that audit quality in basic material and industrial companies in Indonesia is more influenced by the cost of the audit than by the length of the auditor's relationship with the client or the number of Key Audit Matters (KAM) disclosures. When audit quality is low, the risk of material misstatement increases and market confidence can be disrupted. Audit cases that have been questioned in recent years have also driven the need to evaluate the factors that truly affect audit quality.

Since 2022, auditors in Indonesia have also been required to disclose Key Audit Matters—areas of the audit considered most significant and risky. In theory, KAM should make audit reports more transparent and informative. In practice, however, their real impact remains debated, especially when disclosures appear repetitive or generic across reporting periods.

Key Findings

Several results stand out:

1. Audit fees have a significant positive effect.
Higher audit fees are strongly associated with higher audit quality. Adequate compensation allows auditors to devote more time, staff, and procedures to the engagement. This improves their ability to detect material misstatements and exercise professional judgment more rigorously. The study reinforces the idea that audit pricing reflects the depth and seriousness of the audit process.

2. Firm size shows a significant negative effect.
Contrary to common assumptions, larger companies are not automatically linked to better audit quality. Bigger firms often have more complex operations and higher audit risk. If audit planning, resources, and procedures are not scaled accordingly, audit quality can suffer. Company size alone does not guarantee stronger audits.

3. Key Audit Matters have no significant impact.
The number of KAM disclosures did not significantly improve audit quality. The researchers note that KAM implementation in Indonesia still tends to be “boilerplate,” with similar narratives repeated each year. As a result, KAM may function more as a compliance requirement than as a meaningful risk-communication tool.

4. Audit tenure is also not significant.
The length of the auditor–client relationship did not significantly influence audit quality. Professional standards, auditor rotation rules, and internal quality controls may help maintain independence whether the engagement is short or long term.

Implications for Business and Policy

For company management, the message is clear: audit fees should not be treated merely as an administrative cost. They are an investment in the credibility of financial reporting. Excessive fee-cutting could reduce audit depth and increase reputational and financial risks.

For regulators and standard setters, the findings on KAM serve as a warning sign. The regulation exists, but implementation quality needs improvement. Oversight should focus on ensuring KAM disclosures are entity-specific, informative, and not simply recycled language.

For audit firms, especially those handling large and complex clients, careful audit planning and proper allocation of time and staff are essential. Larger clients demand more tailored procedures, not just larger engagement labels.

Kurniawati of Bunda Mulia University emphasizes that audit pricing mechanisms signal how thoroughly an audit is conducted, while disclosure tools like KAM still require refinement before they can meaningfully enhance audit quality.

Researcher Profiles

Adeline Yolanda Claudia Cristie- Universitas Bunda Mulia
Kurniawati- Universitas Bunda Mulia

Research Source

Cristie, A. Y. C., & Kurniawati. Determinant of Audit Quality: The Role of Key Audit Matters, Audit Tenure, Audit Fees and Firm Size (Evidence From Basic Materials and Industrial Companies 2022–2024).

International Journal of Business and Applied Economics (IJBAE), Vol. 5 No. 1, 2026.

DOI : https://doi.org/10.55927/ijbae.v5i1.582

Official URL: https://nblformosapublisher.org/index.php/ijbae