Auditing in Times of Crisis: A Study on Audit Quality during the COVID-19 Pandemic in Indonesia

Marchella Lukito, Gatot Soepriyanto

Abstract

The purpose of this research is to examine the impact of the COVID-19 pandemic on audit quality. This research uses a qualitative methodology with an interview approach to examine the impact of the COVID-19 pandemic on six indicators relating to audit quality, including audit procedures, audit fees, and auditor performance. This study obtains data from six professional auditors from both Big 4 and non-Big 4 public accounting firms who worked before and during the COVID-19 pandemic. Due to the increase in uncertainties during the pandemic and regulations that have forced auditors to conduct audit remotely, the findings have shown that the six indicators related to audit quality were indeed been affected by the pandemic; however, the result shows that audit quality is still maintained during the pandemic due to the efforts made by the auditors, regulations and standards that have been issued during the pandemic. To date and to the best of the researchers’ knowledge, there have been limited qualitative studies that discuss the impact of COVID-19 in Indonesia. Therefore, this research fills this gap by discussing and reviewing the impacts of the pandemic on various indicators of audit quality in Indonesia.

 

Keywords: audit quality, COVID-19, audit fee, audit procedures, auditor’s performance, audit human capital, auditor’s salaries, auditor’s motivation.

 

DOI: https://doi.org/10.55463/hkjss.issn.1021-3619.62.32


Full Text:

PDF


References


AGUSTI, R. (2021). How to Stay Motivated When You Have to Work from Home. Ministry of Finance. Available at: https://www.djkn.kemenkeu.go.id/kpknl-medan/baca-artikel/14224/Bagaimana-Menjaga-Motivasi-Saat-Harus-Bekerja-Dari-Rumah.html

ALBITAR, K., GERGED, A.M., KIKHIA, H. & HUSSAINEY, K. (2021). Auditing in times of social distancing: the effect of COVID-19 on auditing quality. International Journal of Accounting & Information Management, 29(1), pp. 169-178. https://doi.org/10.1108/IJAIM-08-2020-0128

ALDHIZER, G. R., MILLER, J. R., & MORAGLIO, J. E. (1995). Common attributes of quality audits. Journal of Accountancy, 179, pp. 61-68.

BRYMAN, A., & BELL, E. (2011). Business Research Methods. Oxford University Press.

CASTKA, P., SEARCY, C., & FISCHER, S. (2020). Technology-enhanced Auditing in Voluntary Sustainability Standards. The Impact of COVID-19. Sustainability, 12(11), 4740. https://doi.org/10.3390/su12114740

CAULKINS, J. P., GRASS, D., FEICHTINGER, G., et al. (2021). The optimal lockdown intensity for COVID-19. Journal of Mathematical Economics, 93, 102489. https://doi.org/10.1016/j.jmateco.2021.102489

CHEN, H., HUA, S., LIU, Z., & ZHANG, M. (2019). Audit fees, perceived audit risk, and the financial crisis of 2008. Asian Review of Accounting, 27(1), pp. 97-111. https://doi.org/10.1108/ARA-01-2017-0007

CHEN, Y. S., CHANG, B. G. & LEE, C. C. (2008). The association between continuing professional education and financial performance of public accounting firms. The International Journal of Human Resource Management, 19(9), pp. 1720-1737. https://doi.org/10.1080/09585190802295363

CRESWELL, J. W. (2012). Educational Research: Planning, Conducting, and Evaluating Quantitative and Qualitative Research. Pearson

CRESWELL, J. W. (2019). Research Design: Qualitative, Quantitative and Mixed Methods Approaches. SAGE Publications.

DEANGELO, L. E. (1981a). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), pp. 183-199. https://doi.org/10.1016/0165-4101(81)90002-1

DEANGELO, L. E. (1981b). Auditor independence, “low balling”, and disclosure regulation. Journal of Accounting and Economics, 3(2), pp. 113-127. https://doi.org/10.1016/0165-4101(81)90009-4

DEFOND, M., & ZHANG, J. (2014). A review of archival auditing research. Journal of Accounting and Economics, 58(2-3), pp. 275-326. https://doi.org/10.1016/j.jacceco.2014.09.002

DELOITTE. (2020). Potential implications of COVID-19 for the insurance sector. Available at: https://www2.deloitte.com/uk/en/insights/economy/covid-19/impact-of-covid-19-on- insurers.html

FINANCIAL REPORTING COUNCIL. (2006). Promoting Audit Quality. Available at: https://www.frc.org.uk/getattachment/87498b3e-0aec-417c-b804-8b0c461174c8/Discussion-Paper-Promoting-Audit-Quality-Nov-2006.pdf

FRANCIS, J. R. (2004). What do we know about audit quality? The British Accounting Review, 36(4), pp. 345-368. https://doi.org/10.1016/j.bar.2004.09.003

GOODELL, J. W. (2020). COVID-19 and finance: Agendas for future research. Finance Research Letters, 101512. https://doi.org/10.1016/j.frl.2020.101512

HARTADI, B. (2012). Effect of Audit Fee, KAP Rotation, and Auditor Reputation on Audit Quality on the Indonesia Stock Exchange. Jurnal Ekonomi dan Keuangan, 16(1), pp. 84-103. https://doi.org/10.24034/j25485024.y2012.v16.i1.147

HAZAEA, S. A., TABASH, M. I., ABDUL RAHMAN, A. A., et al. (2022). Impact of the COVID-19 Pandemic on Audit Quality: Lessons and Opportunities. Emerging Science Journal, 6, pp. 1-16. https://doi.org/10.28991/esj-2022-SPER-06

HERRBACH, O. (2001). Audit quality, auditor behaviour and the psychological contract. European Accounting Review, 10(4), pp. 787-802. https://doi.org/10.1080/09638180127400

HERZBERG, F. (1987). One More Time: How Do You Motivate Employees? Harvard Business Review Press

HOOPES, J.L., MERKLEY, K.J., & PACELLI, J. (2018). Audit personnel salaries and audit quality. Review of Accounting Studies, 23(3), pp. 1096-1136. https://doi.org/10.1007/s11142-018-9458-y

IAASB. (2011, January). Audit Quality: An IAASB Perspective. Available at https://www.ifac.org/system/files/meetings/files/6086_0.pdf

KAKA, E. J. (2021). COVID-19 and Auditing. Journal of Applied Accounting and Taxation Article History, 6(1), pp. 1-10. http://dx.doi.org/10.30871/jaat.v6i1.2311

KARIM, & VAN ZIJL, T. (2013). Efficiency and opportunism in auditor quality choice in emerging audit services markets: The case of Bangladesh. International Journal of Accounting and Information Management, 21(3), pp. 241-256. https://doi.org/10.1108/IJAIM-08-2011-0027

KHATIB, S. F. A., & NOUR, A. N. I. (2021). The Impact of Corporate Governance on Firm Performance During The COVID-19 Pandemic: Evidence from Malaysia. Journal of Asian Finance, Economics and Business, 8(2), 943–952. https://doi.org/10.13106/jafeb.2021.vol8.no2.0943

KINDER, T. (2020). Pwc Boss Warns Auditing Is Harder Than Ever During Pandemic. Financial Times. Available at: https://www.ft.com/content/ea2d92f5-655b-4f04-a0a4-9f9af8648e48

KOERNIAWATI, D. (2021). The Remote and Agile Auditing: A Fraud Prevention Effort to Navigate the Audit Process in The Covid-19 Pandemic. Jurnal Riset Akuntansi dan Bisnis Airlangga, 6(2), pp. 1131-1149. https://dx.doi.org/10.20473/jraba.v6i2.208

KPMG. (2020). COVID-19: Potential impact on financial reporting. Available at: https://home.kpmg/xx/en/home/insights/2020/03/covid-19-financial-reporting-resource-centre.html

KRISHNAN, G.V. & ZHANG, Y. (2014). Is there a relation between audit fee cuts during the global financial crisis and banks’ financial reporting quality? Journal of Accounting and Public Policy, 33(3), pp. 279-300. https://doi.org/10.1016/j.jaccpubpol.2014.02.004

KURNIASIH, M., & ROHMAN, A. (2014). Effect of Audit Fee, Audit Tenure, and Audit Rotation on Audit Quality. Diponegoro Journal of Accounting, 3(3), pp. 1-10. https://ejournal3.undip.ac.id/index.php/accounting/article/view/6199

LUO, Y. & MALSCH, B. (2022). Re-Examining Auditability through Auditors’ Responses to COVID-19: Roles and Limitations of Improvisation on Production of Auditing Knowledge. Forthcoming at AUDITING: A Journal of Practice & Theory. http://dx.doi.org/10.2139/ssrn.3643823

OJK (a). (2020, March 19). Press Release: OJK Relaxes Deadlines for Financial Reports and GMS. Available at: https://www.ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/OJK-Longgarkan-Batas-Waktu-Laporan-Keuangan-dan-RUPS.aspx

OJK (b). (2020, March 27). Press Release: Financial Services Sector Stability Remains Maintained Amid the Corona Virus Outbreak. Available at: https://www.ojk.go.id/id/berita-dan-kegiatan/siaran-pers/Pages/Siaran-Pers-Stabilitas-Sektor-Jasa-Keuangan-Tetap-Terjaga-di-Tengah-Merebaknya-Wabah-Virus-Corona.aspx

PATTON, M. (1990). Qualitative evaluation and research methods. SAGE Publications.

PRAMASWARADANA, I., & ASTIKA, I. (2017). Effect of Audit Tenure, Audit Fee, Auditor Rotation, Auditor Specialization, and Publication Age on Audit Quality. E-Jurnal Akuntansi, 19(1), pp. 168-194. https://ojs.unud.ac.id/index.php/akuntansi/article/view/25333

ROSE, A. M., ROSE, J. M., SUH, I., & THIBODEAU, J. C. (2019). Analytical procedures: are more good ideas always better for audit quality? Behavioral Research in Accounting, 32(1), pp. 37-49. https://doi.org/10.2308/bria-52512

SEIDMAN, I. (2006). Interviewing as Qualitative Research: A Guide for Researchers in Education and the Social Sciences. Teachers College Press

SUNG, Y. K., & HU, H. H. S. (2021). The impact of airline internal branding on work outcomes using job satisfaction as a mediator. Journal of Air Transport Management, 94, 102063. https://doi.org/10.1016/j.jairtraman.2021.102063

SZCZYGIELSKI, J. J., BRZESZCZYŃSKI, J., CHARTERIS, A., & BWANYA, P. R. (2021). The COVID-19 storm and the energy sector: The impact and role of uncertainty. Energy Economics, 105258. https://doi.org/10.1016/j.eneco.2021.105258

THE WORLD BANK. (2022). Indonesia Overview: Development news, research, data. Available at: https://www.worldbank.org/en/country/indonesia/overview

TROMPETER, G. & WRIGHT, A. (2010). The world has changed: have analytical procedure practices? Contemporary Accounting Research, 27(2), pp. 669-700. https://doi.org/10.1111/j.1911-3846.2010.01023_8.x

TRUONG, P. (2018). The impact of audit employee job satisfaction on audit quality. Available at SSRN 3257437. https://dx.doi.org/10.2139/ssrn.3257437

TURLEY, S., & WILLEKENS, M. (2008). Auditing, Trust and Governance: Regulation in Europe. Routledge

VINCENT, M., KINDER, T. and BEIOLEY, K. (2020). Home Working Leaves UK Businesses Vulnerable to Fraud. Financial Times. Available at: https://www.ft.com/content/1ef7ebab-8c33-4d6a-a7c0-66047f73f482

WIDYASTUTI, S., & JULIANTO, W. (2021). The Influence of the Public Accounting Professional Code of Ethics on the Audit Quality Produced by Auditors at KAPs Registered in East Jakarta. Konferensi Riset Nasional Ekonomi Manajemen dan Akuntansi, 2(1), pp. 1571-1585. https://conference.upnvj.ac.id/index.php/korelasi/article/view/1184/877

WORLD HEALTH ORGANIZATION (2020, December 31). Coronavirus disease (COVID-19): Herd immunity, Lockdowns and COVID-19. Available at: https://www.who.int/news-room/questions-and-answers/item/herd-immunity-lockdowns-and-covid-19

XU, Y., CARSONA, E., FARGHERB, N. and JIANG, L. (2013). Responses by Australian auditors to the global financial crisis. Accounting and Finance, 53(1), pp. 303-338. https://doi.org/10.1111/j.1467-629X.2011.00459.x


Refbacks

  • There are currently no refbacks.