Exploring the perceptions of auditor independence in Indonesia (original) (raw)
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An Empirical Study of Independence from Auditors in Padang, Indonesia
Proceedings of the 4th Padang International Conference on Education, Economics, Business and Accounting (PICEEBA-2 2019), 2020
This research aims to prove the independence among auditors in private and public sector in Padang, West Sumatera, Indonesia. The population is all auditors in Padang, consists of auditors in private sector (internal auditors and public accountants) and auditors in public sector (auditors of inspectorate and BPK). There are 75 respondents in private sector and 79 respondents in public sector. The results show (1) in private sector, there is no significant different of independence between external and internal auditors and (2) in public sector, external auditors tends to be more independence than internal auditors. It implies that instead of auditors themselves, support from top management or legislative is also needed to enhance the independence of auditors.
The purpose of this research is to determine the effect of auditor independence, audit tenure, and audit fee both partially and simultaneously on the audit quality. This research uses primary data collected through the distribution of questionnaires in audit firm listed in Capital Market Accountant Forum – FAPM in Indonesia. The population of research are senior auditor, supervisors, managers, and partners positions and worked on the audit firm member of FAPM. The results of this research show that in general auditor independence, audit tenure, and audit fee have a positive influence on audit quality. The test Coefficient of Determination result of 21.4% indicates that the audit quality can be explained by variations in auditor independence, audit tenure, and audit fee, while the remaining 78,6% is explained by other variables that are not used in this research, such as auditor's size, auditor's industry specialization, and audit risk. To improve the audit quality, Indonesian Institute of Public Accountants (IAPI) should set up an Independent Audit Review Boards and the recent mandatory rotation of audit partners and public accountant firm should follow the IFAC Code of Ethics for Professional Accountants revised in July 2009, which requires audit partner rotation every seven years for public interest entities.
2017
The study was aimed at examining the effects of auditor independence and experience, size of clients's financial health and audit fee on the audit quality. This study is therefore expected to provide empirical evidence about the audit quality in Indonesia, and targets auditors at the Public Accounting Firms in Indonesia as the respondents. Surveys were conducted while hypothesis testing was done with partially simple regression analysis and simultaneously multiple regression in which SPSS application was in use. The study states that on a partial basis, the auditor independence and experience affect the audit quality, while the size of the client's financial health and the audit fee give no significant effects on the audit quality. On the other hand, simultaneously, the auditor independence and experience, the size of the client's financial health, and audit fee significantly affect the audit quality.
Auditor Independence: Malaysian Accountant's Perception
International Journal of Business and Management, 2009
Independence is the primary justification of the existence, and thus the hallmark of the auditing profession. It is recognized as the primary attribute to be maintained by auditors in all circumstances. This study attempts to explore the determinants of auditor independence as perceived by Malaysian accountants using a self-administered mail survey. It was evidenced from the survey that size of audit fees is the most important factor, followed by competition, size of audit firm, tenure, provision of management advisory service and finally audit committee. More specifically, the study indicates that (1) larger size of audit fees, (2) audit firms operating in a higher level of competitive environments, (3) smaller audit firms, (4) audit firms serving a given client over a longer duration, (5) audit firms providing MAS, and, (6) the non-existence of an audit committee, are perceived as having a higher risk of losing independence. This study provides a basis for the profession to establish policies relating to auditor independence. Also, it may assist policy makers and other relevant international accounting agencies in their attempt towards the international harmonization of auditing standards. The major contribution of this paper is that it supplies recent evidence on factors influencing auditor independence from the viewpoint of Malaysian accountants.
Auditor Independence: Malaysian Accountants’ Perceptions
Independence is the primary justification of the existence, and thus the hallmark of the auditing profession. It is recognized as the primary attribute to be maintained by auditors in all circumstances. This study attempts to explore the determinants of auditor independence as perceived by Malaysian accountants using a self-administered mail survey. It was evidenced from the survey that size of audit fees is the most important factor, followed by competition, size of audit firm, tenure, provision of management advisory service and finally audit committee. More specifically, the study indicates that (1) larger size of audit fees, (2) audit firms operating in a higher level of competitive environments, (3) smaller audit firms, (4) audit firms serving a given client over a longer duration, (5) audit firms providing MAS, and, (6) the non-existence of an audit committee, are perceived as having a higher risk of losing independence. This study provides a basis for the profession to establish policies relating to auditor independence. Also, it may assist policy makers and other relevant international accounting agencies in their attempt towards the international harmonization of auditing standards. The major contribution of this paper is that it supplies recent evidence on factors influencing auditor independence from the viewpoint of Malaysian accountants.
2021
This study aims to analyze the effect of auditor objectivity, independence and competence on audit quality of public accounting firms in Batam, Indonesia. This study uses quantitative methods with primary data through distributing questionnaires and using data processing with the help of the SPSS application. Data analysis using multiple linear regression. The population in this study were 44 KAP auditors with the research sample using saturated samples. The results of the study show that the objectivity affects significant on audit quality, Independence does not affect on audit quality and Competence does not affect on audit quality. Keyword: objectivity, independence, competence and audit quality
Compromised quality of audit practice do have a devastating impact on the development and sustainability of an economy, as the professional accounting and auditing service is subject to adherence to professional standards and legal provisions; however literatures indicated that there exist situations in which the audit found to underserved its purpose as it was found that companies that reported an unqualified audit report demonstrated performance contradictory to the report and resulted the consecutive failure of the auditors in the recent past.(Anlop &Chandla, 2003). This has been repeatedly mentioned as the underpinning rational for examining the effectiveness of auditors' independence from different perspectives. Studies on auditors' independence and its effect of actual audit quality and users expectation gap are useful to inform regulatory bodies and the accounting profession in devising ways to enhance auditors' independence and the role in corporate governance. The purpose of this exploratory study is to review existing empirical studies on auditors independence to developed a theoretical framework that facilitate further studies in least underdeveloped audit market. The study is conducted based up on review of literatures and identified the factors that possibly influenced perceived independence of auditor. Introduction Following the accounting scandals and failure of large companies in the developed counties like Enron in the USA and others (Anlop &Chandla, 2003), the issue of auditors' independence has become the concern of regulatory bodies, investors and the accounting profession itself. It is not arguable that weak or lack of auditors' independence impairers the quality of the audit profession and diminishes the public trust on auditor's assurance. The professional code of conduct at international and local levels as well as the commercial codes that govern the business and economic endeavors stated that professional accountants must be competent and independent to undertake an audit and assurance services. Independence takes the central place in audit profession as lack of independence is interpreted as " […. ] the auditor is hardly likely to report breach of the contract between principals (shareholders and lenders) and agents (managers) " (Fearnley and Page, 1994, p. 7; as cited on Roger and George, 2001). Further, weaken independence of external auditor is a serious challenge for the government bodies that make tax liability assessment and regulatory duties on the basis of audited financial reports. In general the purpose of external auditors in society is to give reasonable assurance on fairnes the truthfulness of financial statements. As stated by Lavin (1977:237), in order to perform their role, it is essential that, auditors are independent of the client company and are not seen to have any motive for none disclosure of misleading information. The concept of independence is very important in enhancing the contributions of the audit profession to the sustainable development of the overall economy and the issue has becoming a discourse of academics, professional and regulators in developed and emerging economies, studies addressing the issue in Ethiopian and other least developing countries audit market context are scantly available. Unlike studies in developed countries, few of the previous studies in developing countries were not motivated by notable failure of companies and audit firm scandals, but they indicated that there is a frequent appeal of major financial statement users such as taxing authorities and banks that are in a difficult situation of accepting audited financial reports as a credible and dependable for financial and economic decisions. In this regard Delu (2007) who studied audit expectation gap in Ethiopia found that there was agreement between auditors and users of financial statements that the auditor must act independently; however, both also expressed their doubts on the practical applicability of independence. The underdevelopment in the audit infrastructure was also mentioned by police makers at Ministry of trade and Industry among the possible challenges speeding up investment and economic development in Ethiopia (MOI, 2005). The current momentum to establish publicly owned companies in Ethiopia is also considered as the need for examining auditors' independence. However, there is no publicly known corporate failure and audit scandal in Ethiopia, the possible lack of independence may bring it into existence to hamper the ongoing private sector development and economic growth that has
Independence of Audit Ethical Decision Making Process: A Case of Indonesia
Dlsu Business & Economics Review, 2017
This study aimed to test whether there is a change in the level of independence of auditors when they are exposed to some level of work pressure related to morality and ethics, in three levels of work pressure and the threat of litigation. The study used a quasi-experimental method design with Chi-square test and regression as statistics analysis which involved professional auditors in Indonesia. The results showed that the independence of auditors who become participants in this study was not affected, despite being faced with situations that threaten their continuity in getting future assignments from the client. The auditors were still able to maintain their independence, with the attitude of conservatism and the need to maintain credibility. In addition, there are no significant differences related to the independence, of moral and ethical auditors, both when they are at a low level of work pressure, medium, or high. Since this study only uses a quasi-experimental method, furthe...
AUDITOR INDEPENDENCE IN MALAYSIA
The external auditors have been described as a person who hold the responsibility to express his / her opinion on the fairness of the client's financial statements. They are expected to be independence, not only in fact but also in appearance in conducting their professional work. Lack of independence has caused concern in the community. In this context, the objective of this study is to examine the impact of the degree of competition of audit clients, the provision of non-audit services, the size of the audit firm and audit tenure on Malaysian bank loan officers' perceptions of auditor independence. The perceptions of the loan officers were solicited by distributing questionnaires via drop-offmethod which achieved a response rate of 63 per cent. Taken as a whole, the findings of the study suggest that the respondent would be highly confidence with the independence of the auditor if the degree of competition in the audit market is low; the auditor do not provide management consulting services to the same client; the size of the audit firm is large and the audit tenure is less than 5 years. Plausible implications of the findings of the study are presented and areas for future research are also proposed.
2019
The objective of this study is to analyze the effect of auditor’s competence, ethics and independence on audit quality. The data used in this study are primary data in the form of questionnaires filled out by auditors at Public Accounting Firms of West Jakarta and South Tangerang. The population of this study was the auditors who work at the Public Accounting Firms in West Jakarta & South Tangerang. The sample in this study was 100 respondents, using non-probability sampling method, namely convenience sampling. The data were analyzed by multiple linear regression analysis. The results of this study reveal that auditor’s competence has a significant effect on audit quality, auditor ethics has a significant effect on audit quality, and independence has no significant effect on audit quality. This study is expected to contribute to the development of theory especially those relating to auditing and behavioral accounting for empirical testing of the influence of competence, ethics, and ...