The Effect of Audit Tenure, Leverage, and Audit Firm Size on the Integrity of Financial Statements

Abstract

The integrity of financial statements is essential for ensuring that financial information accurately reflects a company’s actual condition and can be relied upon by investors, creditors, and other stakeholders. This issue is particularly important in infrastructure companies, which generally involve substantial investments, long-term projects, and high financial risks. This study aims to examine the effects of audit tenure, leverage, and audit firm size on financial statement integrity in infrastructure sector companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2024 period. The population of this study consisted of all infrastructure sector companies listed on the IDX during the observation period. This study employed a quantitative approach using secondary data obtained from annual reports and financial statements of infrastructure companies. The sample was selected using purposive sampling, resulting in 11 companies with 55 firm-year observations. Data were analyzed using panel data regression with EViews 12. The results show that audit tenure, leverage, and audit firm size simultaneously have a significant effect on financial statement integrity, as indicated by an F-statistic of 3.566807 and a probability value of 0.020283. Partially, audit tenure has no significant effect on financial statement integrity (p = 0.6848), and leverage also has no significant effect (p = 0.7231). In contrast, audit firm size has a positive and significant effect on financial statement integrity (p = 0.0078). These findings indicate that the capacity, reputation, and audit quality associated with larger audit firms contribute more significantly to strengthening financial statement integrity than audit tenure and leverage. The study implies that infrastructure companies should prioritize auditor competence, independence, and audit quality mechanisms to improve the credibility and reliability of financial reporting.