The Role of Management Turnover in Voluntary Auditor Switching: The Moderating Effect of Financial Distress

This study aims to provide empirical evidence on the influence of internal corporate factors, particularly management turnover, on voluntary auditor switching decisions, as well as to examine the moderating role of financial distress in this relationship. The research employs a quantitative approach, using banking sub-sector companies listed on the Indonesia Stock Exchange (IDX) during the 2019–2023 period as the population. A purposive sampling technique was applied, resulting in a sample of 43 firms with a total of 215 firm-year observations. Data were analysed using logistic regression and Moderated Regression Analysis (MRA), supported by SPSS version 25. The findings indicate that management turnover has a positive effect on voluntary auditor switching. Similarly, financial distress is found to positively influence auditor switching decisions. The main contribution of this study demonstrates that financial distress strengthens the positive relationship between management turnover and voluntary auditor switching. This suggests that newly appointed management in financially distressed firms has a stronger incentive to change auditors in order to obtain fresh perspectives and restore stakeholders’ confidence. In conclusion, the results highlight that financial pressure serves as a catalyst for new management to restructure the firm’s audit strategy. It is recommended that investors and creditors pay close attention to auditor switching events that coincide with management turnover and financial distress, as these may serve as important signals in assessing corporate risk and the credibility of financial reporting.