Ethical Review of Auditor Profession in term of independencybaru

CHAPTER I

INTRODUCTION

1.1 Background

Public accounting profession is a profession

related to the public trust. From the public accounting

profession, the public expects that assessment are free

from fraudulent and highly objective based on the

information provided by the firm’s management in the

financial report (Mulyadi and puradiredja,1998:3).

Public accounting profession is responsible to improve

the level of reliability of the financial statement of

the company,so the user of financial statement can

obtained reliable information of the financial report

as a basis for decision making.

Nowadays Auditor is one of the profession that

give a big influence in business industry,social

organization and goverment institution in Indonesia.

Financial data and economic data that has been audited

by the auditor are really usefull for development of

economic growth in indonesia . In several company,the

stakeholders already expand their operation everywhere

not only in indonesia but also outside indonesia . so

that the capital that being invested by the

stakeholders need to be supervised and controlled .

based on the situation the stakeholders really need a

trusworthy financial report from the company where they

invest their money .

Auditing is an accumulated evidence obtained by

the auditor in order to find the misstatement or fraud

in the organization and compare wheter its already

accordance with the establish criteria . One benefit of

the public accounting is providing an accurate and

reliable information for decision making. The audited

financial statement which done by a public accountant

is more reliable than the financial statements that not

being audited yet or unaudited.

The users of audit report expect that the

financial statements that being audited by independent

public accountants are free from material

misstatement, trustworthy enough to serve as the basis

of decision-making and in accordance with accounting

principles applied in Indonesia. Therefore we need a

competent and independent professional service that

have integrity (ie public accountant) to assess the

fairness of the financial statements presented by

management .

Nowadays,there are many cases of companies who get

"bancrupt" because of the business failure that

correlated with the failure of auditors, it threatens

the credibility of the financial statements. The threat

further influence public perception, especially users

of financial statements for the audit quality. Audit

quality is important because a high quality audit will

produce reliable financial reports as a basis for

decision making .

To support the professionalism as a public

accountant,auditor in carry out audit assignments

should be based on the audit standard which is

established by Indonesian Institute of accountant

(IAI), those are are ; general standards,standard of

field work and reporting standards. The general

standard is a reflection of the personal qualities that

should be possessed by an auditor which requires the

auditor to have the expertise and adequate technical

training in performing audit procedures. While the

standard of field work and reporting standards set the

auditor in terms of data collection and other

activities done by the auditor during the audit and

require the auditor to prepare a report on the

financial statements as a whole.

There are many factors that affect the ability of

auditors, including knowledge and experience. To

perform the task of auditing, auditor requires

knowledge of auditing (general and specific) and

knowledge about the field of auditing, accounting, and

industrial clients. Terms auditing on Auditing

Standards, includes three things: (SA Section 150 SPAP,

2001)

1. Audits should be conducted by one or more who have

the expertise and sufficient technical training

2. In all matters relating to the engagement,

independence in mental attitude must be maintained

by the auditor.

3. In the implementation of the audit and the

preparation of its report, the auditor shall use

professional skills (competencies) carefully and

thoroughly.

The primary objective of an audit of financial

statement is to provide independent assurance of the

financial statement to the stakeholders that the

management have prepared . the auditor issues a report

that includes an opinion wheter or not the financial

statements give a true and fair view . Public

confidence in the operation of capital market and in

the conduct of public interest entities depends on the

credibility of opinions and report issued by the

auditor in line with the audit of financial

statements . Credibility depends on beliefs concerning

the independency,integrity and objectivity of the

auditor and the quality of audit work performed.

The auditor profession is not an easy job . they

have an ethical code of conduct in doing their

profession as an accountant . ethical guidance together

with the statement of fundamental ethical principles

governing the work of all professional accountants and

issued by professional accountancy bodies .

Auditors shall conduct the audit of the financial

statements of an entity with independency,integrity and

objectivity .

1. Competency

a. Achievement of professional competence.

This achievement was initially require a high

standard of general education, followed by special

education, training and professional examinations

in the relevant subjects. This is a normal pattern

of development for members.

b. Maintenance of Professional Competence.

Competence should be maintained and preserved

through commitment, maintenance of professional

competence requires consciousness to continue to

follow the development of the accounting

profession, and its members must implement a

program designed to ensure the presence of quality

control of the implementation of a consistent

professional services.

2. Independence

Independence is freedom from situations and

relationship which make it probable that a

reasonable and informed third party would conclude

or taking part in audit process . Independent

auditor can be defined as an action of the auditor

towards the parties which has a financial

interest in the business being audited .

Independence requires :

a. Independence of mind : the state of mind that

permits the provision of opinion without being

affected by influences that compromise

professional judgement,allowing individual to

act with integrity,and exercise objectivity and

professional scepticism.

b. Independence in apperance : the avoidance of

facts and cicumtances that are so significant

which the reasonable and informed third

party,having knowledge of all relevant

information.

3. Objectivity

Objectivity is a state of mind that excludes

bias,prejudice and compromise that gives fair and

impartial consideration to all matters that are

relevant to the task in hand . like

integrity,objectivity is a fundamental ethical

principle and requires that the auditor’s

judgement is not affected by conflict of

interest .

The three code of ethics above is really influence

the performance of the audit work done by the the

auditors . The reliability of audit report that being

audited by the auditor will depend on the auditor’s

independency,integrity and objectivity . thats why in

every accounting firm they established an ethical code

of conduct that should be obey by their accountants .

In performing the audit, the auditor should act as

a experts in accounting and auditing. Achievement of

expertise begins with formal education, which further

through experience and auditing practices (SPAP, 2001).

In addition the auditor should follow an adequate

technical training which includes technical aspects and

general education.

Research conducted by Libby and Frederick (1990)

in Kusharyanti (2003:26) found that experienced

auditors have a better understanding of the financial

statements. They also able to provide a logic

explanation towards the errors in the financial

statements and to classify error based on the audit

objectives and the structure of the accounting system.

Then Tubbs (1990) in the same article successfully

shows that the more experienced auditors, they are

increasingly more sensitive to the misstatement of

financial statements and more understand the issues

related to the errors found.

So based on the above explanation and from

previous research it can be concluded that the

competence of auditors can be formed through knowledge

and experience.

However,in accordance with its responsibility to

raise the level of reliability of the financial

statements of the company,public accounting firm is not

only need to have the competence or expertise, but also

should have independency in auditing. Without

independence, the auditor means nothing. The public

does not believe in the audited results of the auditor

so that people will not use the services of auditors.

Or in other words,the presence of the auditors is

determined by their independency (Supriyono, 1988).

In addition to enhance the public confidence

towards the auditor’s independency,accountant and

public accounting firm operations (KAP) needs to be

monitored and "audit" by a fellow auditor (peer review)

to assess the feasibility of the design and quality

control system in line with the quality standards which

implied that the resulting output can achieve high

quality standards. Peer review as monitoring mechanism

prepared by the auditors can improve the quality of

accounting and auditing services.

Besides peer review perceived give benefits both

for the clients,public accounting firms and accountants

involved in peer review. These benefits include

reducing the risk of litigation (claims),provide a

positive experience, enhance employee morale, provide

competitive edge and a more convincing clients of the

quality of services given (Harjanti, 2002:59).

This research is very important for public

accountant firms and also for the auditors in order to

know the determinant factors that can influence audit

quality. furthermore,the auditors can improve the audit

quality resulted. For the users of audit services,this

research is also important which is aim to asses how

far the public accountants can keep their consistency

in mantaining the audit quality provided.

Based on the importance of ethical code of audit

profession in doing the audit process,the writer

tittled the thesis “The Ethical review of the Auditor Profession in

term of competency and independency towards the quality of audit

perform in Public Accountant Firm in Padang city”

1.2 Problem definitions

An experienced auditor tend to have a lot of

knowledges and a good structure of memories compared

with the unexperienced auditor . so, more expert and

professional auditor,the decisions that will be made

are likely closer to “accountable”. But again,here we

are also concern about the code of professional

conduct of the auditor in doing their audit .

The development of accounting services has been

expand all over indonesia . its means that the auditing

profession has become one of a major profession in this

era . in line with this,the need of audit services also

increase . Many stakeholders tend to recruit the

auditor to asses wheather the financial report prepared

by management has been properly stated. In auditing the

financial statement that have been prepared by the

management in the company,auditor need to concern the

ethical code of audit profession .

So based on the explanation above, this research

will be focus on these several questions :

1. Does the competency give a significant influence

towards the audit quality?

2. Does the independency influence the audit quality?

1.3 Objective of the research

The objective of this research are :

This research is aim to analyze and prove that

the auditor’s competency and independency

influence the audit quality either partially or

simultaneously.

1.4 Benefit of this research

1. For the writer

The writer can apply the theory that the writer

got in the college . In the university, the

students only learn the theory without doing

the practical action . so by doing this

research,the writer hope she can experienced

herself in dealing with the audit profession

2. For the Public Accountant Firm

They can be more stricted to the code of ethic

of audit profession by keep their competency

and independency . they can also improve their

audit performance after doing this research

3. For others

This research is expected to assist other

people as a references in doing the similar

research

1.5 Writing Systematic

The writing systematic of this research comprises

five parts. The first chapter describes background,

problem definition,research purpose and benefit and

also writing systematic. The literature review about

the this research is identified in the second chapter.

The research methodology including the research

design, scope of the research, population and

sampling,data resources,data analysis techniques are

review in the third chapter. The analysis of the

research results and other factors that could influence

the findings applied in the fourth chapter. And the

fifth part presents the conclusions, limitations and

suggestions for this research.

CHAPTER II

Literature Review

2.1 The role of the auditor

In conducting the audit, the auditor shall act as

an expert in accounting and auditing. Achieving

expertise begins with formal education, which further

expanded through experience and audit practice (SPAP,

2001). In addition, the auditor must have an adequate

technical training including the technical aspects as

well as general education. The junior assistant in

order to be expert must get an adequate supervision

and review of the work by a more experienced

supervisor. An auditor must continuously follow

developments in business and profession. An auditor

must learn, understand and apply the new provisions in

accounting principles and auditing standards adopted by

professional organizations.

To support the professionalism as public

accountant so the auditors in performing the audit task

should be guided by the standards established by the

Indonesian Institute of Accountants (IAI) that is the

general standards, standards of field work and

reporting standards. The general standard is a

reflection of personal qualities that should be

possessed by an auditor . While the standard of field

work and reporting standards set the auditor in terms

of data collection and other activities carried out

during the audit and require the auditor to prepare a

report on the financial statements as a whole that

being audited .

Great confidence of users of audited financial

statements and other services provided by the auditor

are the main reasons why the auditor should pay

attention to the quality of audit result . The

questions from the public about the quality of audits

produced by the greater public accountant after the

many scandals involving public accountant both abroad

and within the country. The scandal in our country can

be seen from the action taken by the council “Ikatan

Akuntan Indonesia” (IAI) against 10 public accounting

firm which indicated heavy offense when auditing banks

that were liquidated in 1998. In addition there are

financial and managerial case of public companies that

can not be detected by a public accountant who led the

company was fined by Bapepam (Winarto, 2002 in

Christiawan 2003).

2.2 Standard - Professional proficiency of Internal

auditor

Internal audits should be performed with proficiency

and due professional care.

Determine if audit personnel are familiar with the Code

of Ethics of the Institute of Internal Auditors.

Evaluate supervision to learn if it is a continuing

process. See detailed review procedures below

- Supervision - Standard 230.

Determine if the entity has adopted a policy to ensure

that the internal audit director is notified promptly

of existing or suspected fraudulent situations.

Determine whether the internal auditors comply with

their responsibilities as they relate to deterring,

detecting, investigating, and reporting fraud. See

detailed review procedures below - Due Professional

Care - Standard 280.

Evaluate technical references and library facilities.

Review and evaluate the education and background of the

auditing staff, continuing professional education, and

the personnel performance evaluation process. See

detailed review procedures below - Professional Proficiency

- Standard 220

2.3 Audit quality

Public accountant or independent auditor in running

their duty,must be able to keep the professional

principles as an accountant . According to Simamora

(2002:47) there are 8 principles that must be obey by

public accountant,which are:

1. Professional responsibility

Every members should concern about morals and

professionals consideration in doing any

activities .

2. Public interest

Every members have an obligation to act in a

service framework for public,respect public’s

trust and show the commitment as basis of

professionalism

3. Integrity

Every members should fulfill their professional

responsibility by a high integrity

4. Objectivity

Every members should keep their objectivity and

free from conflict of interest in the fulfillment

of professionals duty

5. Competency and professionals circumspection

Every members should doing their professional

services carefully,competent and persistence also

have an obligation to preserve knowledges and

professional skills

6. Secrecy

Every members should respect the privacy of the

information obtained during the services performed

and should not use or disclose the information

without permission

7. Professional behavior

Every members should act consistently with a good

professional reputation and avoid the action which

is decrease the professional quality

8. Technical standard

Every members should running their professional

services based on the relevance technical standard

Besides,public accountant should also guided by

the Standards Professionals of Certified Public

Accountants (SPAP) established by the Institute of

Accountants Indonesia (IAI), in this case is the

auditing standards. auditing standards consist of

general standards, standards of field work and

standards reporting (SPAP, 2001; 150:1):

1. General standards.

a. Audits should be conducted by one or more

persons which has an experience and adequate

technical training as an auditor.

b. In all matters relating to the

engagement,independence in mental attitude

must be maintained by the auditor.

c. In the implementation of the audit process

and the preparation of its report, the

professional skills of the auditor is

required to use carefully

2. standard of field work

a. Work should be planned well and if there is

an assistant must be properly supervised.

b. Adequate understanding of the internal

control structure must be obtained to plan

the audit and determine the nature of the

current scope of testing to be done.

c. Sufficient and competent audit evidence

should be obtained through inspection,

observation, submissions, questions and

confirmation as an adequate basis for stating

opinion on the audited financial statements.

3. Reporting Standards.

a. The auditor's report must state whether the

financial statements that has been prepared by

management in accordance with generally accepted

accounting principles applied in Indonesia.

b. The auditor's report should indicate or declare

if there is inconsistencies in the application of

accounting principles in preparation of financial

statements in the period compared with the

application of such accounting principles in the

previous period.

Based on the description above,audit has a

function as process to reduce inconsistencies

information between managers and shareholders by using

outside parties to validate the financial statements.

The users of financial statements which are primarily

the shareholders will take the decisions based on the

reports that have been made by the auditor. it is means

that the auditors have an important role in validation

of financial report in the company. Therefore the

auditor should produce a high quality audit to reduce

the unconformity that occurs between management and

owners.

Moizer (1986) suggest that the measurement of the

quality of the audit process focus on the performance

of the auditors and standards of compliance that have

been outlined. Indonesian Institute of Accountants

(IAI) states that audit will be qualified if they meet

the Auditing standards and Standard of quality control.

De Angelo in Kusharyanti (2003) defines an audit

quality as possible (joint probability) where an

auditor will discover and report a breach in the

client's accounting system. The possibility that the

auditor will find misstatement depends on the quality

of auditors' understanding (competence) while action

report misstatement depends on the independence of the

auditor.

AAA Financial Accounting Committee (2000) in

Christiawan (2002)

states that "audit quality is determined by two things:

competence (expertise) and independence. Both are give

the direct effect on the audit quality. Furthermore,

the perception of financial report user towards the

audit quality is a function of their perceptions

againts auditor independence and expertise ".

Based on the definition of audit quality above it

can be concluded that audit quality is every

possibility (probability) that the auditor when

auditing the client's financial statements might be

found violations that occur in the client's accounting

system and report the findings in the audited financial

statements, which is in carrying out their duties the

auditor guided by Auditing standards and relevant

ethical codes of public accountant.

So based on the definition above it can be seen

that the auditor accused by interested parties in the

company to give an opinion about the fairness of

financial report presented by management and in doing

their task and there are 3 components that must be

owned by the auditor those are ; competence

(expertise), independence, and due professional care.

But in carry out its functions, the auditors are often

in conflict of interests with the company's management.

Management wants their company’s operation or its

performance looks success,one of the way is by

obtaining higher earnings to create an award and

company’s goodwill.

Various studies about audit quality have been

conducted, one of the study by Deis and Giroux (1992)

examined the determinants of audit quality in the

public sector using a sample KAP (Kantor Akuntan

Publik) which is audit of public sector institutions.

This study analyzes the findings Quality Control

Review. Results of this study indicate that long

relationships with clients (audit tenure), number of

clients, peer review, the size and the client's

financial health as well as audit hours work was

significantly related to audit quality. Another factor

that can affect the quality of the audit is education,

the structure of the audit, supervisory

skills,professionalism and workload. The longer audit

tenure, the quality of the audit will decrease. While

the quality of the audit will increase along with the

increasing number of clients, auditor reputation,

technical ability and technical expertise.

2.4 Auditor’s Competency

The first general standard (SA section 210 in SPAP

2001) mention that the audit should be conducted by one

or more person who has the expertise and adequate

technical training as auditor,while the third general

standard (SA section 230 in SPAP, 2001) mention that in

doing the audit and the preparation of its

report,auditor should use their finesse professionalism

carefully and exactly (due professional care).

Lee and Stone (1995), defines competence as an

adequate skills which is explicitly can be used to do

the audit objectively. Another opinion from Dreyfus

(1986),defines competence as the human’s skills that

have sustainable role which is the movement through

the learning process, from "knowing something" to "know

how". Such as a knowledge which commonly depend on the

rules to an intuitive statement.

According to Bedard (1986) in Sri lastanti

(2005:88) defines expertise or competence as a person

who has a knowledge and extensive procedural skills

which demonstrated in the audit experience . Meanwhile,

in the same article, Shanteau (1987) defines expert as

a person who has the skills and the ability in the high

degree.

Based on the explanation above, it can be conclude

that the competent auditor is the auditor with adequate

knowledge and experience and explicit enough to conduct

the audits objectively, accurately and carefully.

2.4.1 Knowledge

SPAP 2001 about general standards, explains

that in conducting an audit, the auditor should

have expertise and sufficient knowledge. Knowledge

is measured by how high the education level of an

auditor because usually they tend to have more

knowledge (views) about the field they do, so they

can identify any problem deeply, instead of that

it will be easier for the auditors in following

the development which is extremely complex

(Meinhard et.al,1987 in Harhinto, 2004:35).

Harhinto (2004) found that knowledge will

affect the audit expertise which will get turn to

determine the quality of the audit . In general

there are 5 knowledge that must be possessed by an

auditor (Kusharyanti, 2003), those are : (1)

Knowledge of general auditing (2) Knowledge of

functional area (3) Knowledge of the most recent

accounting issues (4) Knowledge of the industry

Specifically and (5) Knowledge of general business

and problem solving .

According to Murtanto and Gudono (1999),there

are 2 (two) point of views about expertise .

First, the view of behavior against the expertise

which is based on the paradigm Einhorn .This view

aims to use more objective criteria in defining an

expert. Second,the cognitive perspective which is

explain the expertise from knowledge point of

view. Knowledge gained through direct experience

(considerations made in the past and feedback on

performance ) and indirect experience

( education ) .

2.4.2 Experience

Audit requires a high expertise and

professionalism.These skills are not only

influenced by formal education but there are some

other factors affect,one of them is experiences.

According to Tubbs (1992) in Mayangsari (2003)

experienced auditor has an excellent ability in

terms of: (1.) Detect misstatement (2.) Understand

the errors accurately, (3.) Find out the cause of

the error.

Research done by Libby and Fredrick (1990)

found that an experienced auditor has a good

understanding of financial report . they can also

give a logical explanation about the errors of

financial report and classify the errors based on

the audit objectives and basic accounting system (

Libby et al,1985)

While Harhinto (2004) obtained findings that

the auditor’s experience is positively related to

the audit quality.

2.5 Audior’s Independency

Independent means public accountants are not

easily influenced . Public accountant are not allow to

take sides against the people’s interest . Public

accountant have an obligation to be honest not only to

the management and the owners of companies , but also

to creditors and other parties who put a confidence in

the work of public accountants ( Christiawan , 2002) .

In Code of Ethics of public accountant states that

independence is the attitude expected from a public

accountant for not having a personal interest in carrying

out its duties ,which is contrary to the principles of

integrity and objectivity .

There are so many researches about

independency,either within the country or outside the

country. Lavin ( 1976 ) examined three factors that

affect the independencies of public accountants ,those

are :

(1) Financial relation and business relationship with

the client

(2 ) The furnishing of services other than audit

services to clients

(3) The length of the relationship between public

accountant with the clients

Shockley (1981 ) examined four factors that affect

the independence ,those are :

(1) Competition between public accountant

(2) Provision of consultancy services management to

clients

(3) Size of public accountant firm

(4) Duration of audit relationship

2.5.1 Duration of relationship with the clients

(Audit Tenure)

In Indonesia , the problem about audit tenure or

duration of relationship with the clients has been

regulated in Keputusan Mentri Keuangan No.423/KMK.06/2002

about public accountant services . The minister

decisions limiting the auditor tenure not exceeding 3

years for the same client,while for Public Accounting

Firm ( KAP ) may be up to 5 years . This restriction is

intended in order to avoid the auditor being too close

with the clients which aims to prevent accounting

scandals . The explanation of the differences of some

previous research results as follow: " Too long the

audit task perform will increase the probability of

public accountant loss its independency, because the

public accountants feel satisfied,less innovation and

less strict in implementing the audit procedures .

Instead of that,the longer audit task perform might be

possibly increase the independency because CPAs are

familiar , work can be implemented efficiently and are

more resistant against the client pressure "

(Supriyono, 1988:6)

2.5.2 Client’s pressure

In conducting their audit function,auditor often

experienced conflict of interest with the company’s

management. Management perhaps wants their operation or

performance success,those are illustrated through

higher earnings which aims to create an achievement.

To achieve those objectives is not a usual things

if management in the companies do a pressure to the

auditors in order to report the audited financial

statements generated in accordance with the client’s

wishes. In this situation, the auditor is in dilemma

condition.In one side if the auditor follow the

client's wishes, it definitely breaks the standard of

profession. But if the auditor does not follow the

client then the client can discontinue the audit task

or change the auditor in current KAP .

In addition,the competition among the accounting

firms (KAP) are become larger. The numbers of KAP are

increase, while the growth of the companies are not

comparable with the growth of accounting firm. Moreover

there are many companies doing mergers or acquisitions

and due to the economic crisis in Indonesia, many

companies get bancrupt. So, it will make KAP more

difficult to get the new clients and it makes KAP are

not willing to release their existing clients.

The client’s financial conditions also affect the

auditor’s ability to overcome the pressure from

clients. (Knapp,1985) in (Harhinto,2004:44). Clients

who has a strong financial conditions will be able to

give a certain amount of fee and they can provide a

good facilities for the auditor . Besides the

probability of bankruptcy for the clients who has a

good financial condition is relatively small . In this

situation the auditor feel satisfy of themselves so

that they are less carefull in conducting the audit.

Based on the explanation above, the auditor has a

strategic position in sight of management or users

financial statements . Besides,financial statement

users also put a high expectation towards the results

of the auditor's work in auditing the financial

statements .

In order to meet the good audit quality the

auditor in their profession as an examiner should be

guided by the code of ethics,professional standards and

financial accounting standards regulation in Indonesia.

Each auditors should maintain the integrity and

objectivity in performing their duty such to act

honestly,decisively,without pretension so they can act

fairly,without affected by pressure or parties demand

to fulfill their personal interest .

2.5.3 Peer review

The assertion of the accounting profession to

provide a good quality services and transparency of

the information about the job and public accounting

firm operation . Clarity of information about the

quality control system in accordance with the standards

profession is one of the accountability to the clients

and massive society for audit performed.

Therefore the work of public accountants and

accountant firm’s operation need to be monitored and

"audit" to assess feasibility design of quality control

systems and the relevancy with the quality standards so

that output generated can achieve high quality

standards . peer review as a monitoring mechanism

prepared by the auditor can improve the quality of

accounting and auditing services . peer review give a

good benefits for the client ,and reviewed public

accountant firm and auditor which is involved in team

peer review . The benefits derived from peer review

among others reduce the risk of litigation , providing

a positive experience,enhance employees morale, provide

competitive edge and more convincing the clients for

the quality of services given.

2.6 Previous research

Previous researcher (Supriyono RA,1988) titled his

thesis as “Factors that influence the independence

apprearance of Public Accountant” found that financial

interest,business relationship with the clients,other

services beside audit service,audit tenure (duration of

relationship with clients),competition between public

accountant,the size of Public accountant and audit fee

significantly influenced the independence appearance of

Public accountants.

Another research by (Sekar Mayangsari,2003) about “The

influence of audit skills and independency towards the

audit opinion” . based on the research found that the

auditors that have skill and independency will

influence the audit opinion compared to the auditor

which only have one or have no both characteristics.

Seems that skill and independency are the important

elements in doing an audit.

Research done by (Kursharyanti,2003)which titled “Research

findings about audit quality and probable research topic in the future”

got result that there are many factors which can affect

the audit quality from several perspectives ;

Individual Auditor perspective,team auditor,as well as

Public accountant.

The similar research by (Nurchasanah and

Rahmanti,2003) about “Analysis determinants of Audit

quality”. There are many variables investigated in this

research,those are experience in doing an

audit,understanding client’s business industry,response

the client’s needs,comply to General Standard of leader

involvement in KAP,independency of audit team

member,communication between audit team and client’s

management. From several factors above only audit

experience and leader involvement in KAP which

significantly influence the audit quality.

Another research about audit quality also done by

(Adi Purnomo,2007 ). He titled his research as “Auditor

Perception about the influence of Skill and

Independency towards the audit quality. The result of

the research are based on the auditor perception,skills

factors ; Experience and Knowledge affect to the audit

quality. Whereas, Independecy factors that could affect

the audit quality according to the auditor is only

client’s pressure.

Based on the previous researches it can be

concluded that the audit quality are determined by two

most important things: the competence and independence.

Competencies associated with the adequate knowledge and

experience owned by public accountant in auditing and

accounting. Whereas independence is one of the ethic

components that must be maintained by the public

accountant. Independent means public accountants is not

easily influenced, unbiased and act honestly to anyone

who put trust in the work of public accountants. Under

these conditions, this study will investigate the

influence of competencies and independencies towards

the audit quality. Where competence is proxied to 2

(two) sub variables: knowledge and experience, while

independence is proxied in 3 (3) sub variables those

are long-standing relationships with clients, pressure

from clients and study of peer audit .

2.7 Hypotesis

The hypotesis based on the writer’s opinion are :

1. the ethical code of audit profession ; both

competency and independency could influence the

quality of audit perform since in doing the

audit,the auditor need to concern those aspect

in order to prepare a reliable and trustworthy

audit report . (simultaneous influence)

2. One of the factors either Competency or

Independency could influence the audit quality

(partial influence)

Both are the hypothesis is based on the temporary

estimation of the writer based on the previous research

which state that if the competency and independency

high,probably the audit quality will increase,on the

other hand if the competency and independency of the

auditor low so that the audit quality also decrease.

2.7 Theoritical framework

One of the functions of public accounting is to

produce an accurate and reliable information for

decision making. however conflict of interest between

the internal and external parties, requires the public

accountants to produce a qualified audit report that

can be used by these parties. moreover with the spread

of financial scandals either domestic or international

has wondering wheater the financial statements being

reportet by the company are trustworthy and reliable

enough. This has raised the question about how is the

quality of the audit produced by public accountants in

auditing the client's financial statements.

Various research about audit quality has been done

before and it produced many kind of findings about

former factors of the audit quality. Whereas in general

conclude that,in order to produce a qualified

audit,public accountant that works in audit team

accused to have an adequate competency and good

independency.

Based on the logic from explanation above, the

theoretical framework is formulated as follow :

1. The influence of Auditor’s competency towards the

audit quality

The Auditor’s competency means that the auditor

can use their knowledge and adequate experience fairly

and objectively.

Audit quality means all probability where the

auditor in auditing financial report could find any

mistakes occurred in client’s accounting system and

report it in the audited financial report. And also in

doing their task,the auditor need to follow the

auditing standard and the relevancy of ethical code of

public accountant.

Therefore,it can be understand that the auditor

which has an adequate knowledge and experience will be

able to understand and find out the solution of several

issues deeper and easier to follow the more complex’s

development of their clients environment.

So it can be concluded that as high as the

competency owned by the auditor,as greater the audit

quality will be resulted. This is in line with the

previous research done by Nurchasanah and Rahmanti(2003),Adi

Purnomo (2007). Based on the explanation above,it can be

concluded as follow:

H1 : Competency positively influence the audit’s

quality

2. The influence of Auditor’s Independency towards the

audit quality

Independency is an independent attitude that is

expected for a public accountant not to have a personal

interest in perform their duties, which is inrelevant

to the principle of integrity and objectivity.

So, it is reasonable that in producing qualified

audit report,the auditor's independent attitude is

required. because if the auditor loss their

independency, the audit report that produced by the

auditor will not relevant with the reality which can

not be used as a basis for decision making

H2 : Independency partially influence the audit

quality

3. The influence of Competency and Independency towards

the audit quality

In doing the audit process,auditor need a good

knowledge and experience in order to understand more

about the financial condition and client’s financial

report. Then by having independence attitude the

auditor could make a report based on the reality and

fairly according to the client’s financial report.

So based on the logic above,both competency and

Independency has a significant influence towards the

quality of audit perform simultaneously. It is similar

with the previous research done by Sekar

Mayangsari(2003) that the auditor who has both

competency and independency are having more positive

influence towards the audit quality rather than the

auditor which only has 1 of the factor.

H3 : Competency and Independency influence theaudit quality simultaneously

Theoritical framework

Independent variable

Dependent variabl

Auditor’s Independency

- Audit Tenure- Client’s

Audit’s quality

Auditor’s Competency

- Knowledge- experience

CHAPTER III

RESEARCH METHOD

3.1 Type of Research

This research is a correlational research. Sekaran

(2003) describe this research conduct in the natural

environment of the organization with minimum

interference by the researcher with the normal flow of

work. The researcher will do an interview with the

auditors which based on the criteria that have been

defined by the reasercher and give questionnaires at

the workplace. The research interference in the routine

functioning of the system is minimal as comparing.

3.2 Population and Sample

Population of this research is Auditor in Public

Accountant Firm in Indonesia . For the sample,the

researcher choose some Auditors in several public

accountant firm in padang city

3.1 Sample

NOName of Public Accountant Firm

Number of

auditors

1. KAP Indra Suheri 7

2. KAP Gafar Salim & rekan 8

3. KAP Syahril Ali 6

4. KAP Sayuti Gazali 6

5. KAP Armanda & Ernita 10

6. KAP Rinaldi Munaf 6

Total

4

From 6 Public Accountant firms in Padang city,all

of them are willing to fill the

questionnaires,eventhough each KAP only filled around

4-10 questionnaires. Here is the list of KAP’s that are

willing to be the object of the research :

3.2 Public Accountant firms and Number of Auditors

NO Public Accountant Firms Number of

Auditors

1.

2.

3.

4.

5.

6.

KAP Indra Suheri

KAP Gafar Salim

KAP Syahril Ali

KAP Sayuti Gazali

KAP Armanda & Ernita

KAP Rinaldi Munaf

7

5

4

6

10

6

Total 38

3.3 Data Collection Method

Data collected in this research is primary data

through questionnaires that directly distribute by

researcher. Questionnaires used in order to get exact

required data. The questionnaires in this research

using closed question method. closed question would ask

the respondent to make choices among a set of

alternatives given by the researcher. For the closed

questions the researcher will use likert scale which

consist of 5 choices of number, 1 until 5 scales.

Number 1 refers to Strongly disagree (SD),number 2 shows the

respondent Dissagree (D),number 3 Neutral (N),number 4

refers to agree (A) and number 5 is Strongly agree (SA)

The researcher will also do a library research .

that is a research which done by collecting and

studying the literature & books and also find relevant

references with the related problem to obtain the clear

concept in order to forming the basic theory used in

the discussion.

3.4 Research Instrument

The concept of this study includes the concept of

competency and independency as independent

variables,which is competency is proxied into 2 sub

variable those are knowledge and experience. While

independency is proxied into 3 sub variable those are

audit tenure,client’s pressure and peer review. As

dependent variable is the audit quality.

Those concept are measured by giving score for

every respondent’s answer. The score for every answer

of the questions already defined. Here below the

assessment table or the alternative score from every

questions that will be used in the research.

Table 3.2 score for every questions in research

instrument

Type of

statements

Types of

answer

S

core

Positive

Sangat tidak

setuju (STS)

Tidak setuju (TS)

Ragu-ragu (R)

Setuju (S)

Sangat setuju

(SS)

1

2

3

4

5

Negative

Sangat setuju (SS)

Setuju (S)

Ragu-ragu (R)

Tidak setuju (TS)

Sangat tidak setuju (STS)

5

4

3

2

1

3.5 Type and Source of the data

3.5.1 Type of the data

The type of the data used in this research is

a quantitative data which is in the form of

score for every questions answered by the

respondents based on the quistionnaires.

3.5.2 Sources of the data

The source of the data used in this research

is :

1. Primary Data

This data is obtained directly from the

source or place where the research done.

(Indriantoro and Bambang Supeni,1999:65).

Primary data in this research obtained

through the questionaires spread to the

respondents.

2. Secondary Data

the source of the research which is

obtained indirectly (Indriantoro and

Bambang Supeno,1999;65). As an Empirical

study,so the secondary data in this

research obtained through the

articles,jornals and the previous

researches.

3.6 Model and technique data Analysis

3.6.1 Data Analysis Model

Model Analysis data used in this

research is Multiple Linear Regression Analysis).

Purbayu (2005) stated that multiple

regression is a correlation between some

independent variables with one dependent

variable. If a dependent variable depend on

more than one independent variables,the

correlation between those two variables

called Multiple regression Analysis (Wahid

Sulaiman,2004:80).

The equation of Multiple Linear

Regression :

Y =α + β1X1 + β2X2 + e

Keterangan : Y : Audit Quality

X1 : Auditor’s Competency

X2 : Auditor’s Independency

α : Constanta

β : Coeffisien regression

e : Error.

3.6.2 Data Analysis Technique

3.6.2.1 Data Quality Test

Commitment of the measurement and test

of questionaires or hypotesis is depend

on the quality of the data used in those

testing. The research’s data is useless

if the instruments used to collect the

data does not have reliability and

validity. The test of the measurement

shows the consistency and the accuracy

of data collected. Validity and

reliability of the questionaires in this

research used SPSS (Statistical Product and

Service Solution) program.

a. Validity Test

Validity is a measure that

indicates the extent to

which the measuring instrument is

able to measure what

want to measure (Purbayu, 2005: 247).

Validity test is intended to measure

how real a test or instrument. The

measurement is valid if we measure

the purpose based on fact and truth.

Testing the validity of the data in

this research done statistically,that

is by calculating the correlation

between each questions with the total

score by using Product Moment Pearson

Correlation Method. Data called valid if

the value of r-hitung is get from the

Corrected Item-Total Correlation > from r-

table data validity testing in

significancy 0,05 (5%)

b. Reliability Test

Reliability is a measure that shows

the consistency from measurement

tools in measuring the similar

symptom in the different moments

(Purbayu,2005:251). The reliability

of a variable that is create from

list of questions defined good if

have the score of Cronbach’s Alpha >

from 0,60.

3.6.2.2 Classic Asumption Test

To obtained results or unbiased value or

best unbiased Linear estimator (Best Linear Unbiased

Estimator/BLUE),so the regression model have to

fulfill several assumptions which called

Classic Assumptions. The Classic

Assumptions,those are:

a. Normality Test

Normality test is aim to test

whether in regression model,both

dependent variable and independent

variable having normal distribution or

not (Ghozali 2005:110). A good

regression model is having normal data

distribution or close to normal.

Normality test of the data in this

research use SPSS for Windows application

to test the data in each sample of

variables. To detect the normality of

the data through graph output normal

curve p-p plot. A variable called normal

if the image distribution with the right

points spread around diagonal line and

the spreads of the points follow the

diagonal line (Nugroho, 2005: 24 dalam

Jimmy, 2007).

Instead of using the graph p-plots,

testing normality of the data was also

performed using the curve histogram.

Normality of the data when viewed by

using the histogram curve can be

determined based on the curve model,

that is when the shape of the curve has

a slope that tend to be balanced either

on the left or right side and the shape

of the curve is looks like a perfect

bell.

b. Multicollinearity

This test is aim to detect the

correlation symptoms between one

independent variable with another

independent variable.

Multicollinearity assumptions

stated that independent variable have to

be free from multicollinearity

assumptions. Multicollinearity

assumptions is a symptoms of correlation

between independent variable. This

symptoms shows significant correlations

between the independent variables. If

the symptoms of multicollinearity

occured,one way to repair the model is

by deleting variable from regression

model,so we can choose the best model

(Purbayu, 2005: 238). Wahid Sulaiman

(2004: 89),Multicollinearity means there

is a “perfect” (certain) linear

correlation between several or all of

independent variables from regression

models.

Multicollinearity test can be done

in two ways,those are by seeing VIF

(Variance Inflation Factors) and tolerance

value. If VIF > 10 and tolerance value <

0,10 so there is no Multicollinearity

symptoms occured (Ghozali,2005:92).

c. Heteroscedasticity

Heteroscedasticity is aim to test

whether in the regression models occured

inequality variances from residual one

observation to another observation,or

called as homoscedasticity

(Ghozali,2005:105). A good regression

model is homoscedasticity,not

heteroscedasticity (Ghozali,2005 : 105)

Heteroscedasticity assumptions is

an assumptions in the regression where

the variances from residual is not same

between one and another observations. In

regressions,one one the assumptions that

need to be fulfilled is that variances

from residual from one observations to

another observations is not equal

between one variance from residual. This

variance symptoms that is not same

called heteroscedasticity,while the

existing of similar residual symptoms

from one observation to another

observation called as

homoscedasticity,one way to test this

heteroscedasticity is by seeing the

spreads of the residual variances

(Purbayu,2005: 242).

3.6.2.3 Hypotesis Test

Hypotesis test in this research used

regression linear analysis,that is analysis

which used to know how far is the influence

of auditor’s competency and independency as

an independent variable towards the audit

quality as dependent variable. To test the

hypotesis whether the auditor’s competency

and independency significantly influence the

audit quality either simultaneously or

partially,so that we use simultaneously

hypotesis test with F testing and partially

using t testing.

a. Partial Test

t testing used to know the influence of

each independent variables towards the

dependent variable. t testing does to compare

between t calculation with t table. To determine

the value of t table,defined by significant

rate of 5% with the degree of freedom df =

(n-k-1) where n and is the total of

respondents and k is the total variables.

The criteria of testing used is :

If tcalculation > t table (n-k-1) so Ho is

rejected

If tcalculation < ttable (n-k-1) so Ho is

accepted

Furthermore,t testing can be seen from the

number of probabilitas value (p value) compare with

0,05 (significant level α = 5%). The testing

criteria used is

If p value < 0,05 so Ho is rejected

If p value > 0,05 so Ho is accepted

To find out how much percentage

contribution of the independent variables X1,

X2 partially on audit quality as the

dependent variable can be seen from the

magnitude of the coefficient of determination

(r2). where r2 describes how much the

independent variables used in this study were

able to explain dependent variable.

b. Simultaneously Test (F test)

The F test is used to determine whether

there is influences together (simultaneously)

independent variables on the dependent

variable. Proof is done by comparing the

value Fcalculation with Ftable at 95%

confidence level and degrees of freedom df =

(nk-1) where n is the number of respondents

and k is the number of variables.

Testing criteria used are :

If Fcalculation> Ftable (n-k-1) so Ho is rejected

Statistically means that data used

proved that all independent variables

(X1 and X2) affect the value of the

variable (Y)

If Fcalculation < Ftable (n-k-1) so Ho is accepted

Statistically means that data used

proved that all independent variables

(X1 and X2) does not affect the value of

variable (Y).

Besides the F test can also be seen from the

probability value (p value) compared with

0.05 (The level of significance α = 5%). The

testing criteria used are:

If p value < 0,05 so Ho rejected

If p value > 0,05 so Ho accepted

With a level of significance in this research

using an alpha of 5% or 0.05 then the F test

results can calculated with SPSS on the table

ANOVA.

Furthermore, to determine how much percentage

contribution of the independent variables X1, X2

simultaneously affects the audit quality as the

dependent variable,can be seen from the magnitude

of the coefficient of determination (r2). Where r2

describes how much the independent variables used

in this research were able to explain the

dependent variable.

CHAPTER IV

RESULTS AND DISCUSSION

4.1 Review of research object

The object of this research is Kantor Akuntan Publik

(KAP) is a business entity that has received permission

from finance minister or other authorized officials as

a platform for public accountants in providing

services. Whereas public accountant or an independent

auditor is an accountant who has obtained permission

from finance minister or the competent authority to

provide services.

Public accountant firm in the field of work

providing several services that we called audit

service. The explanation of those services are as

follows :

1. Financial Statements Audit Services

In their capacity as an independent

auditor,public accountant firm conduct a general

audit to give an opinion about the fairness of

financial statements prepared by management

2. Special Audit Services

Special audit can be defined as an audit of

particular statement items performed using

mutually agreed procedures, audit of financial

statements prepared on the basis of the

Comprehensive and audit of financial information

for a particular purpose.

3. Attestation Services

Services related to the issuance of a report

consist of the conclusions about the state of the

assertion (statement) written into other party’s

responsibilities, held from inspection, review and

mutually agreed procedures.

4. Financial Statement Review Services

Services that provide limited assurance that

there is no material modifications that should be

implemented for financial statements conformity

with generally accepted accounting principles on

the basis of other comprehensive accounting.

5. Financial Services Compilation

Services to prepare financial statements

based on the financial data record and other

information given by management of a certain

entities.

6. Consultancy Services

These services include a variety of forms and

fields which is relevant with the competence of

public accountants. For example, a general

consulting services to management, planning system

and implementation of accounting system, education

and training, implementation selection and

recruitment of personnel to provide consulting

services other.

7. Tax Services

Services given consists of general tax

consulting ,tax planning,tax review,SPT

fullfilment and settlement of tax matters.

Organizational structure in Public Accountant Firm as

follow:

1. Colleague or partner,are partner leader and

partner which placed the highest level in Public

Accountant Firm. The obligation is responsible for

the wholly tasks assign by KAP.

2. Manager,are the supervisory examiner,coordinator

from senior auditor. The task is to review the

audit program,review the worksheet,audit report

and management letter.

3. Senior auditor or coordinator of junior

auditor,they are planner accountant and

responsible for execution and examination. The

task is to directing and reviewing the junior

accountant’s task.

4. Junior auditor or staff auditor,they are executing

the examination procedures in detail based on the

direction from senior accountant.

This research is done in the public accountant

firm with the number of respondences 38. The

things that being observed is the factors of

competency which is consists of knowledge and

experience,the factors of independency that

consists of duration of relationship with

client,client’s pressure,peer review and also

audit quality. The data is taken by using

instrument questionnaires which is already past

the validity and reliability tests.

4.2 Descriptive Test Result

4.1 Descriptive Statistics

Descriptive StatisticsN Minimum Maximum Mean Std.

DeviationAUDITOR COMPETENCIES 38 31 46 38,63 3,035AUDITOR INDEPENDENCIES

38 29 40 35,11 3,047

AUDIT QUALITY 38 18 30 24,61 2,707Valid N (listwise) 38

Descriptive Statistics from variables used in this

research is presented in table 4.1. In the table above

can be seen that the audit quality variable with number

of data (N) 38 has mean 24,61 with the minimum audit

quality 18 and maximum 30,while for auditor’s

competency and independency the mean are 38,63 and

35,11 each.

Mean from proxy competency and independency of the

auditor is positive which is indicate that between

auditor’s competency and independency positively

influence the audit quality.

4.3 Classic Assumption Test

Before the data were analyzed further using

multiple regression analysis, firstly it should be

tested for normality test,heteroscedasticity test and

multicollinearity test.

1. Normality Test

Normality test is aim to test whether in

regression model,dependent and independent

variables are having normal distribution or not.

Data normality test in this research using

Kolmologrov-Smirnov test (K-S test) with the

summary of the results analysis is presented in

this following table.

Table 4.4 Normality testOne-Sample Kolmogorov-Smirnov Test

Unstandardized Residual

N 38

Normal Parametersa,b

Mean 0E-7Std. Deviation

2,14086574

Most Extreme Absolute ,106

DifferencesPositive ,063Negative -,106

Kolmogorov-Smirnov Z ,656Asymp. Sig. (2-tailed) ,782a. Test distribution is Normal.b. Calculated from data.

Based on the table above,the value of asymp.Sig is 0,782 which is greater than 0,05 . Means that the distribution of the data is normal.

2. Heteroscedasticity Test

Table 4.3 Heteroscedasticity table

Coefficientsa

Model UnstandardizedCoefficients

StandardizedCoefficients

t Sig.

B Std. Error Beta

1

(Constant) ,165 2,829 ,058 ,954AUDITOR COMPETENCIES ,057 ,072 ,146 ,782 ,440AUDITOR INDEPENDENCIES

-,017 ,072 -,043 -,232 ,818

a. Dependent Variable: ABS_RES

Based on table 4.3 above,obtained a significant value for auditor’s competency variable and auditor’s independency variable for 0,440 and 0,818 which is greater than significancy level 0,05,so it can be concluded that in the regression model there is no heteroscedasticity problem.

3. Multicollinearity Test

Table 4.4 Multicollinearity table

Coefficientsa

Model UnstandardizedCoefficients

Standardized

Coefficients

t Sig. Collinearity Statistics

B Std.Error

Beta Tolerance

VIF

1

(Constant) 1,512 5,195 ,291 ,773AUDITOR COMPETENCIES

,240 ,133 ,269 1,807 ,079 ,804 1,244

AUDITOR INDEPENDENCIES

,393 ,132 ,443 2,971 ,005 ,804 1,244

a. Dependent Variable: AUDIT QUALITY

From the table above we can see that the value of VIF in each variables is less than 5. So means that there is no multicollinearity problem in the regression table.

4.4 Validity TestTable 4.5 Validity table

CorrelationsAUDITQUALITY

AUDITORCOMPETENCIES

AUDITORINDEPENDENCI

ES

AUDIT QUALITY

Pearson Correlation

1 ,465** ,562**

Sig. (2-tailed) ,003 ,000N 38 38 38

AUDITOR COMPETENCIES

Pearson Correlation

,465** 1 ,443**

Sig. (2-tailed) ,003 ,005N 38 38 38

AUDITOR INDEPENDENCIES

Pearson Correlation

,562** ,443** 1

Sig. (2-tailed) ,000 ,005

N 38 38 38**. Correlation is significant at the 0.01 level (2-tailed).

4.5 Reliability Test

Table 4.6 Item Total Statistic

Item-Total StatisticsScale Meanif ItemDeleted

ScaleVariance ifItem Deleted

CorrectedItem-TotalCorrelation

Cronbach'sAlpha if

Item DeletedAUDITOR COMPETENCIES 59,71 25,887 ,513 ,717AUDITOR INDEPENDENCIES

63,24 24,186 ,583 ,632

AUDIT QUALITY 73,74 26,686 ,605 ,614

Cronbach’s alpha for auditor competency,auditor

independency and audit quality are 0,717,0,632 and

0,614 each,which is greater than 0,6,so the questions

applied in this research is reliable.

4.6 Regression Model test

Table 4.7 Model Summary

The results of multiple regression analysis is

obtained multiple coefficient correlations (R) 0,612

with the coefficient determination (R2 ) is 0,374 or

37,4 %.

Model SummaryModel R R Square Adjusted R

SquareStd. Error

of theEstimate

1 ,612a ,374 ,339 2,201a. Predictors: (Constant), AUDITOR INDEPENDENCIES, AUDITOR COMPETENCIES

The value of F regression is 10,474 with the level of significant 0,000,for more explanation can be seen in the following table

Table 4.8 ANOVA

ANOVAa

Model Sum ofSquares

Df Mean Square F Sig.

1

Regression 101,497 2 50,748 10,474 ,000b

Residual 169,582 35 4,845

Total 271,079 37a. Dependent Variable: AUDIT QUALITYb. Predictors: (Constant), AUDITOR INDEPENDENCIES, AUDITOR COMPETENCIES

The coefficients regression is mentions in this following tableTable 4.9 Coefficients results of multiple regression analysis

ModelUnstandadized coefficients

Standardized Coefficients

t sig

B Std. Error Beta

(Constant)

AUDITOR COMPETENCIESAUDITOR INDEPENDENCIES

1,512

,240

,393

5,195

,133

,132

,269

,443

,291

1,807

2,971

,773

,079

,005

a. Dependent Variable: AUDIT QUALITY

From table 4.9 above,we got the multiple regression

analysis equation as follows :

Y= 1,512 + (0,240) X1 Competency + 0,393 X2

Independency

Here is the explanation of multiple regression analysis

1. Auditor’s competency has t value of

1,807,coefficient B 0,240 and significancy level

0,079. This prove that variable coefficient (X1)

auditor competency has positive influence 0,240

towards the audit quality (Y). With level of

significant 0,079 which is greater from

significancy level 0,05 means auditor’s competency

give a positive influence but not significant

towards the audit quality because the level of

significancy is greater than significant level of

0,05.

2. Auditor’s independency has t value 2,971, B

coefficient 0,393 and significancy level 0,005.

This prove that coefficient variable (X2)

auditor’s independency has a positive influence

towards the audit quality (Y) with significancy

level 0,005. Means that if the auditor’s

independency high,so the audit quality will also

increase.

3. Constants 1,512 means that an auditor still could

have an audit quality as the amount of constants

eventhough the independent variable is free (zero)

4.7 Hypotesis Test Results

1. T test results (Partial)

T test is used to recognize the influence of each

independent variables towards the dependent variable

those are between competency towards the audit quality

and independency towards the audit quality. From the

research conducted,obtained that regression

coefficients,t value and partial significancy as

follows:

Table 4.10 Coefficient regression partially and significancy test

Coefficient

ModelUnstandardized coefficients

Standardized Coefficients

t sig

B Std.Error

Beta

(Constant)

AUDITOR COMPETENCIESAUDITOR INDEPENDENCIES

1,512

,240

,393

5,195

,133

,132

,269

,443

,291

1,807

2,971

,773

,079

,005

a. Dependent Variable: AUDIT QUALITY

T test each can be seen in table 4.10 which is in

t value with df value = n-k-1 = n-2-1 = 35 so the value

of t table obtained is 2,030. based on the table

above,t value of auditor’s competency 1,807 < 2,030. So

partially auditor’s competency does not give an

influence towards the audit quality,while the auditor’s

independency 2,971> 2,030 so partially,auditor’s

independency influence the audit quality.

2. F Test Results (simultaneously)

F test is used to recognize whether there is a

simultaneously influence of independent variable

towards the dependent variable,that is by compare

Fcalculation with F table with the level of confidence

95% and significancy 0,05. From the analysis

results,obtained multiple regression model as follows:

Table 4.11 F Test Simultaneously

ANOVAa

Model Sum ofSquares

Df Mean Square F Sig.

1

Regression 101,497 2 50,748 10,474 ,000b

Residual 169,582 35 4,845

Total 271,079 37a. Dependent Variable: AUDIT QUALITYb. Predictors: (Constant), AUDITOR INDEPENDENCIES, AUDITOR COMPETENCIES

Based on table 4.11 obtained F calculation as

10,474 by using 95% level of confidence and

significancy level 0,05,df 1 = total variables – 1 = 3-

1 = 2 and df 2 (n-k-1) or 38-2-1= 35,results obtained

for F table as 3,27. So the value of F calculation > F

table,means auditor’s competency and auditor’s

independency simultaneously influence the audit

quality.

4.8 Discussions

From the research that has been done,noticed that

auditor’s competency does not really have significant

influence towards the audit quality. The influence

arised is positive. That is,as higher the auditor’s

competency so the audit quality will also increase.

However the significant level of competency is 0,079

which is greater than 0,05. Means that the competency

owned by auditors is not really influence the

increasing of the audit quality.

For competency variable (X1) which is proxied into

auditor’s knowledge and experience,has coefficient

regressions value of 0,240 units which means that if

the competency owned by the auditors increase 1

units,it will increase the audit quality for 0,240

units.

For independency variable which is proxied into

duration of relationship with clients,pressure from

clients and peer review has a significant influence

towards the audit quality,that is with regression

coefficients value 0,393 which means that in every

increasing of 1 units of independency variable will

impact to the increasing audit quality resulted by the

auditors for 0,393 units.

From the results of the research

simultaneously,recognized that the audit quality of the

auditors in public accountant firm in padang city could

be determined by both competency and independency’s

factors in the determinant coefficients R2 37,4 % and

the rest is 62,6% determined by other factors outside

this research model.

From the results above could be understand that to

improve the audit quality only influenced by one variable

that is independency,this could be understand because if

the auditors really independent they will not be

influence by the clients. The auditor will be free and

independent in doing their duty. However if the auditors

does not have independency especially when they got a

pressures from the clients,the audit quality perform will

not be maximum.

So it can be concluded as follows:

Hypotesi

s

Resu

lts

Hypotesis 1 Rejec

ted

Hypotesis 2 Accep

ted

Hypotesis 3 Accep

ted

CHAPTER VCONCLUSIONS

5.1 Conclusion

Based on the research that has been done which aim

to find the empirical evidence about the relationship

between auditor’s competency and independency towards

the audit quality in public accountant firm in padang

city. Proven that there is an influence between

competency variable and independency variable of the

auditors towards the audit quality. For the competence

of the auditor has a positive influence 0,240 towards

the audit quality (Y). With level of significant 0,079

which is greater from significancy level 0,05 means

that the auditor’s competency give a positive influence

but not really significant towards the audit quality

because the level of significancy is greater than

significant level of 0,05. While for auditor’s

independency has a positive influence towards the audit

quality (Y) with significancy level 0,005 < 0,05 .

Means that if the auditor’s independency high,so the

audit quality will also increase.

And it proved that the auditor’s independency can

improve the audit quality,this shows in the hypotesis t

results (partial) which shows that there is an

influence of auditor’s independency towards the audit

quality that is Ftable > Fcalculation (2,971> 2,030)

while for the competence does not shows a significant

influence towards the audit quality,this shows in t

test table (partial) which is ttable < tcalculation

(1,807 < 2,030)

5.2 Limitation of this research

1. This research is limited to the reseach object of the auditor that works in Public accountat firm (KAP) in Padang city. So there is a probability of

obtaining a different results,discussions or conclusions regarding to the different public accountant firms observed

2. Number of samples and respondents3. This research used survey methods which there

might be a probability that the respondents did not answer the questions based on the actual conditions.

5.3 SuggestionsBased on the research results that has been done,so

the researcher give some suggestions as follows:1. In order to increase the audit quality,it will be

better for the public accountant firms to improve their auditor’s competency. Such as provide a training and also give a chance for the auditors to join any course to increase their professionalseducation.

2. For the auditors,they must improve their independency,because independency could influence the audit quality. The auditors which is conduct an audit from the clients must be really independent,so they will be free from the client’spressure and could conduct the audit objectively and obtain a qualified audit results.

3. For the next research,it is better to add the number of KAP and respondents being observed and also expand the respondents scale. Not only for the operational auditors but also for the head of KAP.

4. For the next researcher will be better if adding several variables that probably could influence the audit quality

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