J. Basic. Appl. Sci. Res., 4(4)65-73, 2014 ISSN 2090-4304 Journal of Basic and Applied © 2014, TextRoad Publication Scientific Research www.textroad.com The Influence of Size and Complexity of Regional Government, Auditors’ Experience and Audit Opinion on Audit Quality and Audit Delay Paulus Kombo Allo Layuk, Ubud Salim, MS. Idrus, Djumahir University of Brawijaya, Malang Received: January 14 2014 Accepted: March 31 2014 ABSTRACT This study aims at testing and proving empirically (1) whether the size of regional government, regional government complexity, the experience of auditors, and the audit opinion affect the quality of the audit, (2) whether the size of regional government, regional government complexity, the experience of auditors, the audit opinion affect audit delay, (3) whether the level of audit quality affects audit delay. (4) whether the size of regional government, regional government complexity, the experience of auditors, the audit opinion affect audit delay through the level of audit quality. Theoretically, the results of this research are expected to enrich and to complete the repertoire of knowledge in the field of public sector audit so it will be useful for academics and practitioners. The populations were regency / city Governments in Papua and the Audit Board of the Republic of Indonesia (BPK RI) members – representative auditors in Papua Province. The samples were all district / city and team leaders of BPK auditors in Papua Province. The sampling technique used for the District / City was the entire population and used panel data from 2007 until 2011, while for BPK auditors it was all auditors who had been a team leader (signed opinion). The analysis of research data used Partial Lest Square (PLS). The results of this study indicate that: (1) the size of government has a positive effect but in the opposite direction to the theory, the complexity of regional government has a positive effect, the experience of auditors has a positive effect, the audit opinion has a negative effect on the level of audit quality. (2) The size of regional government has a negative effect, the complexity of regional governments has no effect, the experience does not affect the auditors, the audit opinion negatively affects audit delay. (3) The level of audit quality has a positive effect on audit delay. (4) The size of regional government partially mediates, the complexity of regional government mediates perfectly, the experience of auditors mediates perfectly, the audit opinion mediates partially on audit delay through the level of audit quality. KEYWORD: Size of Regional Government, Complexity of regional government, Auditor Experience, Audit Opinion, Level of Audit Quality, Audit delay 1. BACKGROUND Regional Governments have a duty and responsibility to run the government, community development and social services so that they are required to submit reports of regional financial accountability. The regional financial accountability statements can be used as an indicator to assess the regional government performances related to the success of properly performing duties and responsibilities or not (Suprapto, 2006). The regional governments are required to perform the regional financial management well in order to realize the goal of good governance (clean government), where a good regional financial management is the ability to report on regional finances on time, and in economic, efficient, transparent and accountable way. A Regional Head has the responsibility to make sure that the accountability report presented by the Regional Working Units (SKPD) is in accordance with the Government Accounting Standards (SAP). Therefore, it is necessary to have a guidance to the regional financial management to the Head as well as to all SKPD entities, so that the resulting financial statements issued by the SKPD are as expected, where the result from a combination of all SKPD financial statements will be the Regional Government Finance Report (LKPD). Complexity or the major elements of the implementation of a good governance (good governance) according to the United Nations Development Programme (UNDP) as cited by Mardiasmo (2002) gives the complexity of good governance namely: participation, rule of law, transparency, responsiveness, consensus *Corresponding Author: Paulus Kombo Allo Layuk, Djumahir, University of Brawijaya, Malang 65 Layuk et al., 2014 orientation, efficiency and effectiveness, accountability, strategic vision. The complexity of good governance explains that the regional financial management should be transparent, accountable, participatory, economical, efficient, and effective. The regional government’s financial statements that have been audited by BPK should be submitted to: (a). Community (b). House of Representatives, (c). Investors and (d). Requiring third party (PP. 8 of 2006). The Government Regulation Number 24 of 2005 about the Government Accounting Standards states that one of the concrete efforts to achieve transparency and accountability in the financial management of the State is the delivery of government financial accountability statements that meet the principle on time (timeliness) and are arranged based on the acceptable government accounting standards. The principle of timeliness (timeliness) is one of the indicator of the implementation of the rule of good governance. The paradigm of good governance implementation in governance, development, and public services is not solely based only on the government (government) or a state (state), but must involve all elements, both the insideof the bureaucracy as well as the outside of the public bureaucracy (Widodo, 2001). Audit delay is a potential indicator of the efforts made by auditors, in addition, the Audit delay is also said to be the number of days between the end of the fiscal year up to the date of the auditor's report (Payne and Jensen, 2002). Johnson (1998) defines audit delay as the period of time from the end of the fiscal year to the reporting date, while Ashton (1987) defines audit delay as the number of calendar days from the end of the fiscal year to the date of the auditor's report. Based on those definitions, audit delay can be broadly defined as the span of time of completion of the audit of financial statements which is measured by the length of days needed to obtain the reports of independent auditors on the inspection of the financial statements since the date of the close of the book until the date stamped on the independent auditor's report. Many researches on the factors that affect audit delay have been done both in the private sectors or the public sectors. Researches in the private sector about the factors that affect audit delay were ever made by Carslaw and Kaplan (2006) in a study on a company in New Zealand, found that the size of the company and the audit opinion affected audit delay. Iskandar and Trisnawati (2010) found that the classification of industry, the profit or loss for the year, the size of the public accounting firm, were influential to audit delay while total assets, the audit opinion, the proportion of debt had no effect on audit delay. Lianto and Kusuma (2010) found that profitability, solvency, and the age ofa company affected audit delay while the size of a company and the type of industry did not affect the audit delay. Puspitasari and Nirmalasari (2012) found that the size of the company, solvency, corporate income and the size of a company affected audit delay. This study was intended to examine the real audit delay existing in the regional government. Referring to the uniqueness of the public sectors in Indonesia, which are different from the public sectors in the United States, the public sectors in the United States can be audited by a public accounting firm (private) while in Indonesia, BPK RI is the only state agency that is responsible for the examination and responsibility of the State's financial management. Apart from the above, there are also different levels of significances of each variable of quality attributes of the financial statements, and a very limited number of studies conducted in Indonesia related to audit delay on regional government financial statements. 2. THEORETICAL REVIEW The variables used in this study were Variable: Size of Regional Governments, Complexity of Regional Governments, Auditors’ Experience, Auditors’ Opinions, Audit Quality and Audit Delay. a. The size of the regional government (X1) to the level of audit quality(Y1) The size of the regional government indicates the total assets while level of audit indicates the amount audit findings. It means that the higher the number the total assets of the Government of Regency / City increases, the higher the number of audit findings will be, it is contrary to the hypothesis. The first cause is the beginning balance of the Government of Regency / City has not been assessed well. According to the Technical Bulletin No.2 year 2005 about the preparation of the composition of the Beginning Balance of Regional Government saying that the reliability of information about the assets, liabilities, and equity in the opening balance is very important in building regional government accounting system, because the amounts presented in the balance sheet will be the beginning of the beginning balance, which is presented in the accounting system period. Many of the number of assets on the opening balance sheet are not supported with much evidence of ownership. The second cause is the asset management at Regional Government of Regency / City in the province of Papua has not been good. The findings in lancar assets generally occur in cash and fixed supplies. While on the fixed assets, the findings can occur more than once for a single 66 J. Basic. Appl. Sci. Res., 4(4)65-73, 2014 activity. For example is the procurement of goods. The findings on procurement of goods can occur in unplanned based on needs. The procurement process is not transparent, contains mark-ups, is wrong noted, unclear who is utilizing. In the Minister of the Internal Affairs’ Regulation No.