Audit Firm Reputation versus Auditor Capability: Their Effect on Audit Quality in Indonesia

Astrid Rudyanto ()
Additional contact information
Astrid Rudyanto: Department of Accountancy, Trisakti School of Management Author-2-Name: Dipta Daniswari Author-2-Workplace-Name: Trisakti School of Management, Jl. Kyai Tapa No 20, 11440, Jakarta, Indonesia Author-3-Name: Yuli Oktaviani Author-3-Workplace-Name: Trisakti School of Management, Jl. Kyai Tapa No 20, 11440, Jakarta, Indonesia

GATR Journals from Global Academy of Training and Research (GATR) Enterprise

Abstract: Objective �The emergence of the ASEAN Single Window has triggered the need for higher audit quality in ASEAN countries, including Indonesia. A recent study conducted in Indonesia reveals that the reputation of auditing firms, as rated by clients and users, and auditor's competence, as rated by the auditor, are the primary determinants of audit quality. The purpose of this study is to analyze whether the reputation or competence of an auditor affects audit quality, within manufacturing companies in Indonesia. Methodology/Technique �This paper contributes to the creation of new measurements for auditor capability, by highlighting empirical evidence concerning the determinants of audit quality in Indonesia. Findings � By using discretionary accrual as the inverse determinant of audit quality, the result show that financial statements audited by reputable auditing firms contain the same discretionary accruals as those audited by other firms. The results further demonstrate that auditor capability does not affect audit quality. Audit quality in Indonesia is therefore not determined by firm reputation or auditor capability. Hence, it is important to search for new determinants of audit quality. Research Limitations/Implications � The limitation of this research is the low number of reputable audit firms and specialized auditors used by the sample firms, which lead to the exclusion of numerous controlled variables that may be integral when explaining audit quality. Future studies may use other sample firms and use additional controlled variables, to further explain audit quality.

Keywords: Audit Quality; Discretionary Accrual; Audit Firm Reputation; Auditor Capability (search for similar items in EconPapers)
JEL-codes: M40 M42 (search for similar items in EconPapers)
Pages: 9
Date: 2017-12-16
New Economics Papers: this item is included in nep-acc, nep-sbm and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in Accounting and Finance Review, Volume 2, Issue 4

Downloads: (external link)
http://gatrenterprise.com/GATRJournals/pdf_files/A ... strid%20Rudyanto.pdf (application/pdf)
http://gatrenterprise.com/GATRJournals/online_submission.html

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gtr:gatrjs:afr147

Access Statistics for this paper

More papers in GATR Journals from Global Academy of Training and Research (GATR) Enterprise
Bibliographic data for series maintained by Prof. Dr. Abd Rahim Mohamad ().