Abstract:

This study aims to obtain empirical evidence about the impact of audit market concentration on the audit quality regarding PP No. 20 of 2015 which abolished mandatory audit firm rotation. Before 2015, in Indonesia, there was a rule that the audit firm must be rotated every 6 years. The sample used in this study is a non-financial company listed on the Indonesia Stock Exchange in 2013-2017. This study found that with the abolition of audit firm rotation on PP No. 20 of 2015, will affect the impact of audit market concentration on audit quality. When regression with all samples (data before and after regulation), this study did not find the effect of audit market concentration on audit quality. But when the data is separated between the period before and after the PP No. 20 of 2015, this study found that in the period before the regulation, the audit market concentration had no effect on audit quality. But in the period after the regulation, the audit market concentration has a positive effect on audit quality. This result shows that the rules which remove the obligation of audit firm rotation, effective in improving audit quality. This is possible because with the abolition of mandatory audit firm  rotation, the audit market concentration will increase and an audit firm will increasingly have knowledge of the company being audited so that its competence increases and impacts on the quality of the audit