Research Article

The Affecting Factors of Audit Quality with Earnings Surprise Benchmark Approach as a Measure of Audit Quality

Whilis Aziz Panji Pamungkas
Sebelas Maret University, Indonesia
* Corresponding author
Evi Gantyowati
Sebelas Maret University, Indonesia
DOI icon 10.24018/ejbmr.2021.6.4.983

Read Counter
1071

Downloads
864

Citations

Share

Article Sidebar

Submitted 2021-07-17
Published 2021-08-08

Read counter = 1071 times

Table of Contents

Article Main Content

This research examines whether abnormal audit fee, client importance, public accounting firm industry (PAF) specialization, public accounting firm (PAF) reputation, audit delay may affect the audit quality of manufacturing companies. This research used a quantitative method as a basis for assessing audit quality using the earnings surprise benchmark method, which emphasizes the profits generated by the company. This research used 350 data panel samples from manufacturing companies that have been listed on the Indonesia Stock Exchange (IDX) throughout 2013-2019. Sampling using non-probability with purposive sampling technique, and to analyze the data, the researcher used logistic regression because the dependent variable in this research only consisted of two values. This research shows that abnormal audit fees affect negatively significant to audit quality, while client importance and public accounting firm industry specialization affects positively significant to the audit. However, public accounting firm reputation does not have a positive effect on audit quality, and audit delay does not negatively affect significantly on audit quality. This research is the first time to examine abnormal audit fees on audit quality using earning surprise benchmark calculation method. Results from this research are expected to be beneficial for policy determination and audit standard development by related regulations and research development on audit quality.

Keywords: Abnormal Audit Fee, Audit Delay, Audit Quality, Client Importance, Earnings Surprise Benchmark, Public Accounting Firm Industry, Reputation of Public Accounting Firm

References

  1. OJK. Siaran Pers: Otoritas Jasa Keuangan, 2019. Retrieved from https://ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/Siaran-Pers-Jelang-Tutup-Tahun-2019-Kinerja-Pasar-Modal-Positif-Jumlah-Investor-Saham-Meningkat-.aspx.
     Google Scholar
  2. Tuanakotta T. M. Audit Berbasis ISA (Internasional Standars on Auditing). In Salemba Empat, 2014.
     Google Scholar
  3. Aqmarina V., & Yendrawati R. The factors that influence audit quality by earnings surprise benchmark. Jurnal Akuntansi & Auditing Indonesia, 2019, 23(1), 21–29.
     Google Scholar
  4. https://doi.org/10.20885/jaai.vol23.iss1.art3.
     Google Scholar
  5. Wijaya A. L. The Effect of Audit Quality on Firm Value: A Case in Indonesian Manufacturing Firm. Journal of Accounting Finance and Auditing Studies (JAFAS), 2020, 6(1), 1–15. https://doi.org/10.32602/jafas.2020.001.
     Google Scholar
  6. Kalanjati D. S., Nasution D., Jonnergård K., & Sutedjo S. Auditor rotations and audit quality: A perspective from cumulative number of audit partner and audit firm rotations. Asian Review of Accounting, 27(4), 639–660. https://doi.org/10.1108/ARA-10-2018-0182.
     Google Scholar
  7. Garcia‐Blandon J., Argilés‐Bosch J. M., & Ravenda D. Audit firm tenure and audit quality: A cross‐European study. Journal of International Financial Management & Accounting, 2020, 31(1), 35–64. https://doi.org/10.1111/jifm.12098.
     Google Scholar
  8. Suciana M. F., & Setiawan M. A. Pengaruh Rotasi Audit, Spesialisasi Industri KAP, dan Client Importance Terhadap Kualitas Audit (Studi dengan Pendekatan Earning Surprise Benchmark). Wahana Riset Akuntansi, 2018, 6(1), 1159.
     Google Scholar
  9. https://doi.org/10.24036/wra.v6i1.101939.
     Google Scholar
  10. Arens A, Elder Randal J, Beasley Mark S, dan Jusuf A. A. Jasa Audit dan Assurance Pendekatan Terpadu (Adaptasi Indonesia). In Jakarta: Salemba Empat, 2011.
     Google Scholar
  11. Jung S., Kim B., & Chung J.-R. The association between abnormal audit fees and audit quality after IFRS adoption. International Journal of Accounting and Information Management, 2016, 24(3), 252–271. https://doi.org/10.1108/IJAIM-07-2015-0044.
     Google Scholar
  12. Asthana S. C., & Boone J. P. Abnormal audit fee and audit quality. Auditing: A Journal of Practice & Theory, 2012, 31(3), 1–22. https://doi.org/10.2308/ajpt-10294.
     Google Scholar
  13. Choi J. H., Kim J. B., & Zang Y. Do abnormally high audit fees impair audit quality? Auditing: A Journal of Practice & Theory, 2010, 29(2), 115–140. https://doi.org/10.2308/aud.2010.29.2.115.
     Google Scholar
  14. Krauß P., Pronobis P., & Zülch H. Abnormal audit fees and audit quality: initial evidence from the German audit market. Journal of Business Economics, 2015, 85(1), 45–84.
     Google Scholar
  15. https://doi.org/10.1007/s11573-014-0709-5.
     Google Scholar
  16. Fitriany, Veronica S., & Anggraita V. Impact of Abnormal Audit Fee to Audit Quality: Indonesian Case Study. American Journal of Economics, 2016, 6(1), 72–78.
     Google Scholar
  17. https://doi.org/10.5923/j.economics.20160601.09.
     Google Scholar
  18. Chang Y.-S., Chiang C.-Y., Liu L.-L. (Sunny), & Xie X. (Lucy). Audit partner independence and business affiliation: evidence from Taiwan. Advances in Accounting, 2019, 46, 100428. https://doi.org/10.1016/j.adiac.2019.100428.
     Google Scholar
  19. Atik T. W. Pengaruh Client Importance Dan Pergantian Auditor Terhadap Kualitas Audit. Jurnal Akuntansi Unesa, 2014, 66, 37–39.
     Google Scholar
  20. Chen Shimin, Sun S. Y. J., & Wu D. Client Importance, Institutional Improvements, and Audit Quality in China: An Office and Individual Auditor Level Analysis. The Accounting Review, 2010, 85(1), 127–158. https://doi.org/10.2308/accr.2010.85.1.127.
     Google Scholar
  21. Wahyuni N., & Fitriany Pengaruh Client Importance, Tenure, dan Spesialisasi Audit Terhadap Kualitas Audit. Simposium Nasional Akuntansi XV, 2012, 1–45.
     Google Scholar
  22. Craswell A. T., Francis J. R., & Taylor S. L. Auditor brand name reputations and industry specializations. Journal of Accounting and Economics, 1995, 20(3), 297–322. https://doi.org/10.1016/0165-4101(95)00403-3.
     Google Scholar
  23. Fanani Z., Budi V. M. F., & Utama A. A. G. S. Specialist tenure of audit partner and audit quality. Growing Science Accounting, 2021, 7(3), 573–580. https://doi.org/10.5267/j.ac.2021.1.001.
     Google Scholar
  24. Salehi M., Fakhri Mahmoudi M. R., & Daemi Gah,A. A meta-analysis approach for determinants of effective factors on audit quality. Journal of Accounting in Emerging Economies, 2019, 9(2), 287–312. https://doi.org/10.1108/JAEE-03-2018-0025.
     Google Scholar
  25. Hegazy M., Sabagh A. Al, & Hamdy R. The Effect of Audit Quality on Earnings Management and Quality of Audit Work. Journal of Accounting and Economics, 2015, 15(38), 43–74.
     Google Scholar
  26. Prasetia I. F., & Rozali R. D. Y. Pengaruh Tenur Audit, Rotasi Audit Dan Reputasi Kap Terhadap Kualitas Audit (Studi Pada Perusahaan Manufaktur Yang Terdaftar Di Bursa Efek Indonesia Tahun 2011-2014). Jurnal ASET (Akuntansi Riset), 2016, 8(1), 39. https://doi.org/10.17509/jaset.v8i1.4020.
     Google Scholar
  27. Che L., Hope O.-K., & Langli J. C. How Big-4 Firms Improve Audit Quality. SSRN Electronic Journal, (January), 2019. https://doi.org/10.2139/ssrn.3364952.
     Google Scholar
  28. Choi J. S., Lim H. J., & Mali D. Mandatory audit firm rotation and Big4 effect on audit quality: Evidence from South Korea. Asian Academy of Management Journal of Accounting and Finance, 2017, 13(1), 1–40. https://doi.org/10.21315/aamjaf2017.13.1.1.
     Google Scholar
  29. Lennox, C. S. Audit Quality and Auditor Size: An Evaluation of Reputation and Deep Pockets Hypotheses. Journal of Business Finance and Accounting, 1999, 26(7&8), 779–805. https://doi.org/10.1111/1468-5957.00275.
     Google Scholar
  30. Wiyantoro L. S., & Usman F. Audit Tenure and Quality to Audit Report Lag in Banking. European Research Studies Journal, XXI (Issue 3), 2018, 417–428. https://doi.org/10.35808/ersj/1072.
     Google Scholar
  31. Subekti I. & N. W. Faktor-Faktor Yang Berpengaruh Terhadap Audit Delay di Indonesia. Simposium Nasional Akuntansi Vii, 2004, 991–1002.
     Google Scholar
  32. Sari R. R., & Ghozali I. Faktor – Faktor Pengaruh Audit Report Lag (Kajian Empiris Pada Perusahaan manufaktur Yang Terdaftar Di Bursa Efek IndonesiaTahun 2010-2012). Diponegoro Journal of Accounting, 2014, 3(2). Retrieved from https://ejournal3.undip.ac.id/index.php/accounting/article/view/6160.
     Google Scholar
  33. Dewi S. G. P., & Yuyetta E. N. A. Pengaruh Kualitas Audit Dan Tenure Audit Terhadap Audit Repot Lag (Arl) Dengan Spesialisasi Auditor Industri Sebagai Variabel Moderasi (Studi Empiris pada …. Diponegoro Journal of Accounting, 2014, 3, 1–11. Retrieved from http://eprints.undip.ac.id/42915/.
     Google Scholar
  34. Kusumah R. W. R., & Manurung D. T. H. The effect of audit quality, tenure of audit to audit lag report with specialized industry of auditors as a moderating variable. International Journal of Applied Business and Economic Research, 2017, 15(25), 99–107. Retrieved from https://www.researchgate.net/publication/322436969_The_Effect_of_Audit_Quality_Tenure_of_Audit_to_Audit_Lag_Report_with_Specialized_Industry_of_Auditors_as_a_Moderating_Variable.
     Google Scholar
  35. Ismail K. N. I. K., & Chandler R. The timeliness of quarterly financial reports of companies in Malaysia. Asian Review of Accounting, 2004, 12(1), 1–18. https://doi.org/10.1108/eb060770.
     Google Scholar
  36. Carey P., & Simnett R. Audit partner tenure and audit quality. Accounting Review, 2006, 81(3), 653–676. https://doi.org/10.2308/accr.2006.81.3.653.
     Google Scholar
  37. Wibowo A., & Rossieta H. Faktor-Faktor Determinasi Kualitas Audit – Suatu Studi Dengan Pendekatan Earnings Surprise. Simposium Nasional Akuntansi XII, 2009.
     Google Scholar
  38. Siregar R. O., & Kiswara E. Pengaruh Abnormal Audit Fee, Adopsi Ifrs Dan Karakteristik Perusahaan Terhadap Kualitas Laba. Diponegoro Journal of Accounting, 2018, 7, 1–15. Retrieved from https://ejournal3.undip.ac.id/index.php/accounting/article/view/25870/23062.
     Google Scholar
  39. Chen Songsheng, Li Z., & Chi W. Client importance and audit quality: evidence from China. Asia-Pacific Journal of Accounting & Economics, 2018, 25(5), 624–638. https://doi.org/10.1080/16081625.2016.1268061.
     Google Scholar
  40. Darya K., & Puspitasari S. A. Reputasi KAP, Audit Tenure, Ukuran Perusahaan Klien dan Kualitas Audit (Studi pada Perusahaan LQ 45 Indonesia). Audit Dan Assurance Teknologi Informasi, 2017, 13(2), 97–109. Retrieved from http://journal.ibs.ac.id/index.php/jkp/article/view/49.
     Google Scholar
  41. Giri, E. F. Pengaruh Tenur Kantor Akuntan Publik (Kap) Dan Reputasi Kap Terhadap Kualitas Audit: Kasus Rotasi Wajib Auditor Di Indonesia. Simposium Nasional Akuntansi XIII, 2010, 13, 1–26.
     Google Scholar
  42. Herianti E., & Suryani A. Pengaruh Kualitas Auditor, Audit Delay dan Audit Tenure Terhadap Kualitas Audit Perbankan yang Terdaftar di BEI Periode 2012-2014. Prosiding Seminar Nasional INDOCOMPAC, 2016, 416–425.
     Google Scholar
  43. Suyanto, Putry N. A. C., & Sugiharti E. Anteseden Dan Konsekuensi Audit Delay Terhadap Kualitas Audit. Jurnal Akuntansi Dewantara, 2018, 2 No.1 Apr (1), 96–108. https://doi.org/10.29230/ad.v2i1.2581.
     Google Scholar