The Determinants of Audit Quality: A Study Using the Approach of Earnings Surprise Benchmark

Arifin Praditya Putra,Reni Yendrawati,Rina Asmara

doi:10.30560/jems.v4n3p16

Abstract

This study aims to find empirical evidence regarding the influence of audit tenure, audit firm rotation, audit firm industry specialization, and time budget pressure on audit quality. This research is a quantitative research using secondary data in the form of financial statements. This study uses a population of manufacturing companies in the consumer goods sector listed on the Indonesia Stock Exchange in 2015-2017. The sampling was done by using a non-probability method with a purposive sampling technique. The number of samples used in this study is 34 companies. The data analysis method used is a logistic regression analysis method using Statistical Package for Social Sciences (SPSS) version 21. The results of this study indicate that audit tenure and audit firm rotation have no effect on audit quality, PAF industry specialization has a positive effect on audit quality, time budget pressure has a negative effect on audit quality.

Highlights

1.1 Introduce the ProblemIt is well-known that financial statements serve as a tool for investors and stakeholders to know a company’s condition
It can be concluded that audit tenure does not have a significant influence on audit quality
The research finding has revealed that audit tenure does not have a significant influence on audit quality

Summary

Introduction

1.1 Introduce the ProblemIt is well-known that financial statements serve as a tool for investors and stakeholders to know a company’s condition. Independent auditor's opinion is an objective opinion on the company's financial statements so that the quality of audits conducted by independent auditors largely determines the quality of the information presented by company management. An audit with good quality will more likely boost the reliability of financial statements, so that investors are able to make the right decisions on the information obtained from the financial statements This is in line with the definition of audit quality by De Angelo (1981) in Watkins et al (2004) “The quality of audit services is defined to be the market-assessed joint probability that a given auditor will both (a) discover a breach in the client's accounting system, and (b) report the breach”

Objectives

Methods

Results

Conclusion