Audit Quality Attibutes and Client Factors

Muhamad Muhamad Taqi, Rahmawati Rahmawati, Bandi Bandi, Sri Murni, Warsina Warsina


This study aims to examine and provide empirical evidence of the impact of client size and industry specialization on audit quality and the effect of audit quality on audit fees, reputation, and litigation both on audit-detecting misstatement quality and audit-reporting misstatement quality-analyzed based on client factors. This paper utilizes the perspective regulatory theory and signaling theory and is based on quantitative-causality research conducted by the survey method. Technique sampling is performed by purposive sampling. The results indicate that client size had a significant positive effect on the audit quality-detecting misstatement but does not have any impact on the audit quality-reporting misstatements whereas industry specialization auditors have no effect on the audit quality-detecting misstatement but have a significant effect on the audit quality-reporting misstatements. Clients may opt for the auditor that charges lower fees but can provide a positive signal for stakeholders or choose an auditor that is registered with BPK or OJK because such audit firms are more acceptable by stakeholders. As for the external auditors, the high-quality audit is necessary to avoid the risk of litigation in addition to maintaining independence.





Audit quality; Auditor Speciali-zation; Detecting misstatement; Reporting misstatement; and Firm Reputation.

Full Text:



Adeyemi, S. B., and Fagbemi, T.O. (2010). Audit Quality, Corporate Governance and Firm Characteristics in Nigeria, International Journal of Business and Management. 5(5): 169-179.

Al-Thuneibat, A. A., Al Issa, R. T. I., & Ata Baker, R. A. (2011). Do audit tenure and firm size contribute to audit quality?: Empirical evidence from Jordan. Managerial Auditing Journal, 26(4), 317–334. 10.1108/02686901111124648

Almarayeh, T. S., Aibar-Guzmán, B., & Abdullatif, M. (2020). Does audit quality influence earnings management in emerging markets? Evidence from Jordan. Revista de Contabilidad-Spanish Accounting Review, 23(1), 64–74. rcsar.365091

Alsmairat, Y. Y., Yusoff, W. S., & Ali, M. A. (2019). The effect of audit tenure and audit firm size on the audit quality: evidence from Jordanian auditors. International Journal of Business and Technopreneurship, 9(1), 15–24.

Anastasopoulos, N. P., & Anastasopoulos, M. P. (2012). The evolutionary dynamics of audit. European Journal of Operational Research, 216(2), 469–476. j.ejor.2011.06.003

Anis, A., (2014). Auditors’ Perceptions of Audit Firm Rotation Impact On Audit Quality In Egypt. Accounting & Taxation. 6(1): 105-120.

Arens, A. A., Elder, R.A. and Beasley, M.S. (2012). Auditing and Assurance Services, Fourteenth Edition, London: Pearson.

Atmojo, R. T., & Sukirman. (2019). Effect of Tenure, Audit Specialization, and KAP ’ s Reputation on the Quality of Audit Mediated by Audit Committees. 8(1), 66–73. 10.15294/aaj.v8i1.25538

Behn, B. K., Choi, J. H., & Rang, T. (2008). Audit quality and properties of analyst earnings forecasts. Accounting Review, 83(2), 327–349.

Benson, K., Clarkson, P. M., Smith, T., & Tutticci, I. (2015). A review of accounting research in the Asia Pacific region. Australian Journal of Management, 40(1), 36–88. 10.1177/0312896214565121

Brown, C. D., and Raghunandan,K. (1997). Audit Quality in Audits of Federal Programs by Non-Federal Auditors; A Reply, Accounting Horizons. 11(1): 72-75.

Carey, P., and Simnett, R. (2006). Audit Partner Tenure and Audit Quality. The Accounting Review. 81(3): 653-676.

Choi, J. H., Kim, C., Kim, J. B., & Zang, Y. (2010). Audit office size, audit quality, and audit pricing. Auditing, 29(1), 73–97.

Choi, J. H., Kim, J. B., Qiu, A. A., & Zang, Y. (2012). Geographic proximity between auditor and client: How does it impact audit quality? Auditing, 31(2), 43–72.

Connelly, B. L., Certo, S.T., Ireland, R.D., and C. R. Reutzel, C.R. (2011). Signaling Theory: A Review and Assessment. Journal of Management. 37(1): 39-67.

Cook, J. A., Kowaleski, Z. T., Minnis, M., Johnstone, K. M., Cook, J., & Minnis, M. (2019). Auditors are Known by the Companies They Keep University of Notre Dame-Department of Accountancy University of Chicago-Booth School of Business Management Auditors are Known by the Companies They Keep *. Working Paper Chicago Booth No. 19-12, (19).

Craswell, Taylor, S. L. & Francis, J. R. (1995). Auditor Brand Name Reputations and Industry Specializations. Journal of Accounting & Economic, 20(3), 297-305.

DeAngelo, L. E., (1981). Auditor Size and Audit Quality, Journal of Accounting and Economic. 3: 183-199.

Deis, D. and Giroux, G. (1996). The effect of auditor changes on audit fees, audit hours, and audit quality. Journal of Accounting and Public Policy, 1996, vol. 15, issue 1, 55-76

Deis, D.R. Jr. and Gary A. Giroux, G. A. (1992). Determinants of Audit Quality in the Public Sector. The Accounting Review. Vol. 67, No. 3 (Jul., 1992), pp. 462-479

Deshmukh, A., & Zhao, X. (2020). Audit Quality and Readability of the Annual Reports. International Journal of Strategic Decision Sciences, 11(1), 76–90. 10.4018/ijsds.2020010105

Durham, G. B. (2003). Likelihood-based specification analysis of continuous-time models of the short-term interest rate. Journal of Financial Economics, 70(3), 463–487.

Elder, R. J., M. S. Beasley, A. A. Arens, and Yusuf, A.A. (2011). Jasa Audit dan Assurance Pendekatan Terpadu (Adaptasi Indpnesia), Buku 1, Jakarta: Salemba Empat-Pearson Education

Fernando, G. D., A. M. A. Meguid,A.M.A. and Elder,R.J. (2010). Audit Quality Attributes, Client Size and Cost of Equity Capital, Review of Accounting and Finance.

Grant, Julia, Robert Bricker and Rimma Shiptsova. (1996) Audit Quality and Profesional Self-Regulation; A Social Dilemma Perspective and Laboratory Investigation, Auditing; A Journal of Practice and Theory. 15 (1) Spring

Hay, D. & Davis, D. (2004). The Voluntary Choice of an Auditor of Any Level of Quality. Auditing: A Journal of Practice and Theory, 23, 37-53.

Hogan, C., and Martin. R.D. (2009). Risk shifts in the market for audits: An examination of changes in risk for ―second tier‖ audit firms. Auditing: A Journal of Practice and Theory. 28(2): 93–118.

Hoitash, R., A. Markelevich and Barragato, C.A. (2007). Auditor Fees and Audit Quality, European Business Review. 19(1): 40-71.

Inaam, Z., Khmoussi, H., & Fatma, Z. (2012). Audit Quality and Earnings Management in the Tunisian Context. International Journal of Accounting and Financial Reporting, 2(2), 17.

Kadous, K., (2000). The Effects of Audit Quality and Consequence Severity on Juror Evaluation of Auditor Responsibility for Plaintiff Losses, The Accounting Review. 75(3): 327-341.

Kalabeke, W., Sadiq, M., & Keong, O. C. (2019). Auditors Tenure and Financial Reporting Quality: Evidence from a Developing Country. International Journal of Asian Social Science, 9(5), 335–341. 10.18488/journal.1.2019.95.335.341

King, R. R.. and R. Schwartz. (1999). Legal Penalties and Audit Quality: An Experimental Investigation, Contemporary Accounting Research. 16(4): 685-710.

Latham, C. K., and Linville, M. (1998). A Review Of The Literature In Audit Litigation, Journal of Accounting Literature. 17: 175-213.

Laura, S., & Darmawan, A. (2019). Does Eco-Efficiency Reduce The Cost Of Equity Capital? Advances in Social Science, Education and Humanities Research, (Icaess), 343–347.

Leventis, S., and Caramanis, C. (2005). Determinants of Audit Time as a Proxy of Audit Quality, Managerial Auditing Journal. 20(5): 460-478.

Memiş, M. Ü., & Çetenak, E. H. (2012). Earnings management, audit quality and legal environment: An international comparison. International Journal of Economics and Financial Issues, 2(4), 460–469.

Mgbame, C. O., Eragbhe, E., & Osazuwa, N. P. (2012). Audit Partner Tenure and Audit Quality: An Empirical Analysis. European Journal of Business and Management, 4(7), 2222–2839.

Moazam, Muhammad, Corresponding, & Khan. (2015). Quality and Audit Fees: Evidence from Pakistan. Research Journal of Finance and Accounting, 6(7), 1–12.

Oliverio, M. E., (2007). Promoting Audit Quality: U.K. Financial Reporting Council Discussion Paper, The CPA Journal. 77(2): 12-13.

Palmrose, Z., V., (1988). An Analysis of Auditor Litigation And Audit Service Quality, The Accounting Review. LXIII (1): 55-73.Peraturan Pengurus Ikatan Akuntan Publik Indonesia (IAPI) Nomor 2 Tahun 2016 tentang Penentuan Imbal Jasa Audit Laporan Kauangan.

Posner, R. A., 1974. Theories of Economics Regulation, Bell Journal of Economics and Management Science. 5 (2) : 335-358.

Stigler, G. J., (1971). The Theory of Economic Regulation, New York: Holt, Reinhart and Winston of Canada Ltd

Sulong, Z., Sultan, U., Abidin, Z., Gardner, J. C., Hussin, A. H., Kampus, U., Mcgowan, C. B. (2013). Managerial Ownership, Leverage, and Audit Quality Impact on Firm Performance: Evidence From The Malaysian Ace Market. Accounting & Taxation, 5(1), 59–70. 1308617

Sun. J., and Liu, G. (2010). Client-specific Litigation Risk and Audit Quality Differentiation, Managerial Auditing Journal. 26(4): 300-316.

Tan, F., & Yim, A. (2014). Can strategic uncertainty help deter tax evasion? An experiment on auditing rules. Journal of Economic Psychology, 40(35014), 161–174.

Watkins, A. L., W. Hillison, and Morecroft, S.E. (2004). Audit Quality: A Synthesis of Theory and Empirical Evidence, Journal of Accounting Literature. 23: 153-193.

Wooten, T. C. (2003). Research About Audit Quality, The CPA Journal. 73(1): 48-51.

Xin-jun, N. (2007). Client Importance and Audit Quality: Evidence from A-Shares Capital Market Data of 2002-2005, Journal of Modern Accounting and Auditing. 3(11): 50-59.



  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

AFRE (Accounting and Financial Review)

Postgraduate - University of Merdeka Malang

Postgraduate  Building, Terusan Dieng Street 62-64
Malang City, East Java, Indonesia, 65146.

View My Stats      Web

Other Link

Follow Us

Site Home Journal
Unmer Malang
(0341) 567617
 Fax(0341) 567617

AFRE (Accounting and Financial Review)  Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.