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THE INFLUENCE OF COMPETENCE AND INDEPENDENCE

TOWARDS AUDIT QUALITY

(Empirical Study at Public Accountant Firm in South Jakarta)

THESIS

Submitted to Faculty of Economics and Business as Partial Requirement for

Acquiring the Bachelor Degree of Economics

By:

Mohamed Mohamud Warsame

109082100028

DEPARTMENT OF ACCOUNTING

INTERNATIONAL CLASS PROGRAM

FACULTY OF ECONOMICS AND BUSINESS

SYARIF HIDAYATULLAH STATE ISLAMIC UNIVERSITY

JAKARTA

2015

vi

ABSTRACT

Audit quality can be affected by several factors, both internal factors and

external factors. The factors which have very important role in determining the

quality of audit are competence and independence.

This study aims to analyze and prove the empirical evidence of the

influence of auditors competence including experience and knowledge and

auditors independence including long association with client, the pressure from

client, peer review and non-audit services provided by Certified Public

Accountant Firm towards audit quality. The samples are 52 respondents taken

from auditors of Certified Accountant Firm in South Jakarta. As for answering the

research hypothesis, the author used multiple regression analysis after testing its

classical assumptions

Based on the T-test that has been calculated by the researcher, it shows

that the value of auditor competence = 7.921 > 2.405 while the value of auditor

independence = 6.006 > 2.405. It means that both the competence and

independence of auditors partially affect towards audit quality. Moreover, the F-

test result shows that F count > F table (169.589 > 3,190). It means that both the

competence and independence of auditors simultaneously affect towards audit

quality. Therefore, both the auditor and Certified Public Accounting Firm are

expected to improve their competence and independence. The more competence

and independence do the auditors have, the more quality of audit will be resulted.

Keywords: Auditor, Competence, Independence, Quality Audit.

vii

Brief of Figure

Figure 2.1 Conceptual Framework .......................................................................... 25

Figure 4.3 Chart Heteroscedasticity ........................................................................ 47

viii

Brief of Table

Table 3.1 Names of Certified Public Accountant Firm ......................................... 29

Table 3.2 Scores in each Statements in the Research Instruments ......................... 31

Table 3.3 Number of each kind of Statements ........................................................ 31

Table 4.1 Descriptive Statistic ................................................................................ 45

Table 4.2 Data Normality Test ................................................................................ 46

Table 4.4 Multicollinearity Test .............................................................................. 47

Table 4.5 Autocorrelation Test ............................................................................... 48

Table 4.6 Correlation Test ...................................................................................... 48

Table 4.7 Reliability Test ........................................................................................ 49

Table 4.8 Model Summary ...................................................................................... 50

Table 4.9 ANOVA .................................................................................................. 50

Table 4.10 Coefficient Multiple Regression ........................................................... 50

Table 4.11 Coefficient Partial Regression .............................................................. 52

Table 4.12 Simultaneous Test ................................................................................. 52

ix

BRIEF CONTENTS

Curriculum Vitae ................................................................................................. i

Preface ............................................................................................................ iii

Abstract ............................................................................................................ vi

Brief of Figure ...................................................................................................... vii

Brief of Table ......................................................................................................... viii

Brief Contents ........................................................................................................ ix

CHAPTER I INTRODUCTION

A. Background ....................................................................... 1

B. Problem Formulation ......................................................... 5

C. Purposes of Research ........................................................ 5

D. Benefits of Research .......................................................... 6

CHAPTER II THEORETICAL FRAMEWORK

A. Basic Theory ..................................................................... 8

1. Auditing ...................................................................... 8

2. Audit Quality .............................................................. 10

3. Competence ................................................................ 15

4. Independence .............................................................. 17

B. Conceptual Framework ..................................................... 22

C. Hypothesis ......................................................................... 26

CHAPTER III RESEARCH METHODOLOGY

A. Research Design ................................................................ 27

B. Determination Sample Method ......................................... 28

C. Data Collection Method .................................................... 30

D. Research Instrument .......................................................... 30

E. Types and Sources of Data ................................................ 32

F. Models and Techniques of Analysis Data ......................... 33

x

CHAPTER IV ANALYSIS AND DISCUSSION

A. Research Object Description ............................................. 42

B. Result of Descriptive Text ................................................. 45

C. Classical Assumption Test Result ..................................... 45

D. Validity Test Result ........................................................... 48

E. Reliability Test Result ....................................................... 49

F. Regression Test Result ...................................................... 49

G. Hypothesis Test Result ...................................................... 51

H. Discussion ......................................................................... 53

CHAPTER V CLOSING

A. Conclusion ......................................................................... 55

B. Limitation .......................................................................... 56

C. Suggestion ......................................................................... 56

REFERENCES ...................................................................................................... 57

ATTACHMENTS ................................................................................................. 59

1

CHAPTER 1

INTRODUCTION

A. Background

The business world is currently experiencing very rapid growth. Many

small businesses become large and even large enterprises become more

advanced. It is tight enough oversight needed to manage enterprises and to the

running of a business activity, so that the company can achieve its intended

purpose. But with strict supervision sometimes not even able to detect and

prevent potential fraud dishonesty that occurs in the business world

particularly in the financial statement fraud, and will therefore need a service

that can detect and assess the reliability of the report dishonesty. In the

service of this problem is audit services, especially public accountant services

in audit assignment needed to evaluate and determine the reasonableness of a

companys financial report.

The audit report users expect that the report has been audited by

independent public accountants of material misstatements, trustworthy

authorization to serve as the basis of decision and in accordance with

accounting principles applicable in Indonesia. Thus it needs an independent

professional services and objective (ie public accountant) to evaluate the

appropriateness of financial reports presented by management.

Many cases enterprises fell because business failures associated with

the failure of auditors; this threatens the credibility of financial reporting.

2

This threat of further influence public perception, financial reports on wearer

especially Audit quality is import