ABSTRACT
Investigations related to voluntary audit firm rotation are still rare, whereas voluntary audit firm rotation can be an indication of the particular situation that is being faced by the company. This study was conducted with the aim to understand the influence of a company’s financial condition, earnings management and financial statement manipulation to the company’s tendency in audit firm selection when perform voluntary audit firm rotation. The sample of this study is all companies listed on the Indonesia Stock Exchange, except the financial industry, which performed voluntary audit firm rotation in the period 2010 to 2015. The data is tested using the ordinal logistic regression method because the dependent variable is ordinal scale data. The results of this study indicate that a company’s financial condition have no significant effect on the tendency of audit firm selection when voluntary audit firm rotation is performed. Meanwhile, earnings management has a negative significant effect and the manipulation of financial statements has a positive significant effect on the tendency audit firm selection in the event of voluntary audit firm rotation. Companies that do earnings management tend to switch the audit firm to a lower-quality, while when companies are facing manipulation of financial statements they will switch the audit to better quality audit firm. The implication of this study is that voluntary audit rotation conducted by the company is an indication of certain events that exist in the company that can be taken into consideration by decision making.
