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Title: The effects of municipal ownership on auditor size and auditor-client distance

Authors: Ronny Prabowo; Supatmi Supatmi; Yeterina Widi Nugrahanti; Yefta Andi Kus Noegroho

Addresses: Accounting Department, Faculty of Economics and Business, Satya Wacana Christian University, Salatiga, Indonesia ' Accounting Department, Faculty of Economics and Business, Satya Wacana Christian University, Salatiga, Indonesia ' Accounting Department, Faculty of Economics and Business, Satya Wacana Christian University, Salatiga, Indonesia ' Accounting Department, Faculty of Economics and Business, Satya Wacana Christian University, Salatiga, Indonesia

Abstract: This study analyses the effects of municipal ownership on auditor size and auditor-client distance in rural banks on Java Island, Indonesia. This study uses 575 rural banks in Java Island listed by the Financial Service Authority's website in 2019. The main data sources are OJK's website and Indonesian Public Accountant Association's Directory. Our independent variables are municipal ownership (a dummy variable that equals one if a municipal government is the rural bank's majority owner and zero otherwise). The main dependent variables are auditor-client distance, measured by the driving distance (from Google Maps™) between rural bank's headquarter and its audit firm and auditor size (the number of audit firms' OJK-certified partners). Municipally-owned rural banks hire smaller and less distant auditors. Particularly, municipal ownership is negatively associated with auditor size and auditor-client distance. The associations are stronger when rural banks are located in municipalities with at least one audit firm.

Keywords: auditor size; auditor-client distance; municipal ownership; rural banks.

DOI: 10.1504/IJEBR.2024.138079

International Journal of Economics and Business Research, 2024 Vol.27 No.3, pp.533 - 551

Received: 01 Oct 2023
Accepted: 31 Dec 2023
Published online: 21 Apr 2024 *