Measurements of the variables
| Variables | Definitions | Measurements |
|---|---|---|
| Audit Quality | Audit Tenure: Audit Tenure is a commonly used variable to determine audit quality. Audit tenure typically measured the length of the period an auditor has been working for the same client | Auditor period time in the same company from 2015 to 2020 use 1 to 5 |
| Audit Fee: Audit Fees are costs incurred by companies to pay public accounting firms to audit the company's financial statements | The amount paid by the company to receive audit service | |
| Big 5 and Non-Big 5: Big 5 are the largest accounting firms such as KPMG, Deloitte, Baker Tilly, Enrst and Young, BDO PL. Whereas Non-Big 5 are also accounting firms but they are not considered at top of the list | Dummy Variable, Companies audited by Big 5 1, otherwise 0 | |
| Fraud | F-Value: This model was carried out by Dechow et al. (2011). The variable RSST, which measures changes in current assets without cash by subtracting changes in current liabilities and depreciation without short term debt. ΔREC measures changes in receivables from the previous year to the current year as scaled by the average of total assets. ΔINV measures changes in inventories from the previous year to the current year as scaled by the average of total assets. SOFTASSETS refers to soft assets, which is defined as total assets minus PPE and cash with cash equivalents as scaled by the average of total assets. ΔCASHSALES measures the percentage change of cash sales from the previous year to the current year. ΔROA measures the percentage change in total earnings as a division of total assets in the previous year, which is less than the same measure in the current year | F-Value = −7.893 + 0.790 R*RSST +2.518*∆REC +1.191*∆INV +1.979*SOFTASSETS +0.171*∆CHCS – 0.932*∆ROA |
| Control Variables | Size | Size is measured by the total assets of the company |
| Return On Assets | Return on assets which is measured by income continuing operation divided by total assets | |
| Profitability | Profitability is measured by net profit margin | |
| Leverage | Leverage is measured by total assets and divided by total liabilities |
| Variables | Definitions | Measurements |
|---|---|---|
| Audit Quality | Audit Tenure: Audit Tenure is a commonly used variable to determine audit quality. Audit tenure typically measured the length of the period an auditor has been working for the same client | Auditor period time in the same company from 2015 to 2020 use 1 to 5 |
| Audit Fee: Audit Fees are costs incurred by companies to pay public accounting firms to audit the company's financial statements | The amount paid by the company to receive audit service | |
| Big 5 and Non-Big 5: Big 5 are the largest accounting firms such as KPMG, Deloitte, Baker Tilly, Enrst and Young, BDO PL. Whereas Non-Big 5 are also accounting firms but they are not considered at top of the list | Dummy Variable, Companies audited by Big 5 1, otherwise 0 | |
| Fraud | F-Value: This model was carried out by | F-Value = −7.893 + 0.790 R*RSST +2.518*∆REC +1.191*∆INV +1.979*SOFTASSETS +0.171*∆CHCS – 0.932*∆ROA |
| Control Variables | Size | Size is measured by the total assets of the company |
| Return On Assets | Return on assets which is measured by income continuing operation divided by total assets | |
| Profitability | Profitability is measured by net profit margin | |
| Leverage | Leverage is measured by total assets and divided by total liabilities |
Source(s): Table created by authors