The purpose of this research is to examine the effect ofAudit Quality toward higher fees, lower litigation; goodreputation; client and higher valuation. Mostly the researchabout audit quality only investigate the determinant factors,meanwhile this research investigate the effect of audit quality.The samples of this research are 101 Accountants in manyprofession around Jakarta roomates selected by purposivesampling. Path analysis is used in this research. The resultsshown that audit quality have an effect toward higher fees, auditquality have an effect toward lower litigation, audit quality havean effect toward good reputation and audit quality have an effecttoward higher valuation client

., Muhamad Taqi

English

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   Abstract— The purpose of this research is to examine the effect of Audit Quality toward higher fees, lower litigation; good reputation; client and higher valuation. Mostly the research about audit quality only investigate the determinant factors, meanwhile this research investigate the effect of audit quality. The samples of this research are 101 Accountants in many profession around Jakarta roomates selected by purposive sampling. Path analysis is used in this research. The results shown that audit quality have an effect toward higher fees, audit quality have an effect toward lower litigation, audit quality have an effect toward good reputation and audit quality have an effect toward higher valuation client.   Keywords: Audit quality, higher fees, lower litigation, good reputation, client valuation higher.  I. INTRODUCTION  ommon and dominant issue that happens to produce a quality audit is the question of the ability of the auditor in detecting misstatement and reporting misstatement. This is in line with the statement DeAnggelo (1981) defines audit quality as probability in which an auditor discovered and reported about the existence of a breach in the client's accounting system. The ability of the auditor in detecting misstatement  This becomes not mean much when the auditor does not act independently so the impact on the ability and willingness to reporting misstatement. The inability and unwillingness to reporting misstatement impact on audit failure and prejudice that audit quality has declined (Krisnan and Gul, 2009; Francis, 2004).  Francis (2004) states that audit failure will occur under two conditions, namely: (a) when the accounting principles generally accepted (Generally Accepted Accounting Principles or GAAP) are not followed by the auditor (failure GAAP), (b) and when auditors fail to issue or issuing audit reports qualified or modified audit report under the appropriate environmental conditions and appropriate (the failure of the audit report).  Failure audits on high impact litigation and bad reputation, corporate value decreases and fees also declined. Instead audit quality high impact on auditor fees to be received in the future, low litigation, the good reputation and the value of the company increases. It shows that the impact audit quality on auditor and auditee.    Muhamad Taqi, University of  Sultan Ageng Tirtayasa, Banten, 42122, Indonesia (e-mail: muhamad.taqi@yahoo.com).  This study differs from most research related to audit quality tends to examine the determinants or determinants of audit quality. In this study tested the effects or consequences of audits by the research kulaitas Wooten (2003) and the difference in location of the sample / respondents residing in Indonesia. The difference in the location becomes important in the study of audit quality because of differences between countries in terms of the legal system and legislation in force in the country (Francis, 2004), and geographic location (Choi et al., 2007; Choi et al., 2010) could affect audit quality.       II.  LITERATURE REVIEW   The findings Casterella et. al. (2009) indicated that a review of the same profession (peer review) Administered independently by the AICPA provide an effective signal and related to audit quality produced by a public accounting firm. The findings Casterella et. al. (2009) about the reviews profession (peer review) Will be very useful for predicting the occurrence of audit failure (especially in the case of claims made by clients due to the auditor for non-mal practice or neglect against the existing auditor). Besides these findings relate to a public accounting firm indicators that are specific, and the potential to weaken the control of the quality or auditing practices that are at risk in a public accounting firm.   Furthermore Watkins et al. (2004) stated that in the context of determining the price for a security, the audit would be one way to give a signal or a sign of the credibility of the information contained in a financial statement. Further Watkins et al. (2004) stated that some analytical paper examines this hypothesis explains the existence of conflicting and relate to how the reputation of the auditor shall perform or serve as a signal.   In line with the above Wooten (2003) states in his research that the model kosekuensi (outcame) Of the quality of the audit are: higher fees, lower litigation; good reputation, and higher client valuation. Based on the statement above, the hypothesis raised is:  H1: Audit quality effect toward higher fee H2: Audit quality effect toward good reputation  H3: Audit quality effect toward lower litigation H4: Audit quality effect toward higher client valuation   Research Model   Based on the hypothesis that was built on this research, Consequences of Audit Quality  in Signaling Theory Perspective Muhamad Taqi C         DOI: 10.5176/2010-4804_2.4.262 GSTF Journal on Business Review (GBR) Vol.2 No.4, July 2013133 © 2013 GSTF the model of this study are as follows: Higher Fees = β0 + β1 Audit Quality + ε       .............................................(1)  Good Reputation = β0 + β1 Audit Quality + ε     ..................................(2) Lower Litigation = β0 + β1 audit quality + ε     .....................................(3) Higher Client Valuation = β0 + β1 Audit Quality + ε    ...................(4)      Figure1. Research Model III. METHODOLOGY  Population and Sample The population in this study is an accountant in various professions who are in Indonesia, while the sample in this study was the accountant in various professions located in Jakarta and surrounding areas which include auditor, the auditee, regulators, accountants and educators. This is because quality audit interpreted differently by many parties (Wooten, 2003). The election of auditors in different professions located in Jakarta and surrounding areas due to the largest population of KAP (auditor), internal audit and the accounting firm (auditee), And regulator educators and accountants located in Jakarta and surrounding areas.     Sampling Techniques The population in this study is an accountant in various professions who are in Indonesia, while the sample in this study was the accountant in various professions located in Jakarta and surrounding areas which include auditor, the auditee, regulators, accountants and educators. This is because quality audit interpreted differently by many parties (Wooten, 2003). The election of auditors in different professions located in Jakarta and surrounding areas due to the largest population of KAP (auditor), internal audit and the accounting firm (auditee), and regulator educators and accountants located in Jakarta and surrounding areas.    Sampling is done by purposive sampling with Criteria: (1) Accountant in Indonesia, (2) Working in Jakarta and surrounding areas, (3) a minimum of 1 year experience in the field, (4) Available sampled.  Data Analysis Techniques   Path analysis used to describe the effect of quality audit toward higer fee, goor reputation, law Litigation, and higher client valuation using primary data . IV. FINDINGS AND DISCUSSION  Effect of Audit Quality Toward Higher Fee    Audit Quality and Fee This has a positive and significant relationship indicated by the value original sample estimate for 0632 and T-statistics for 5.776 (greater than t-count, 1.96). This shows that to obtain fee higher, auditor (KAP) must send a signal to steakholders that the quality of audits provided by the auditor (KAP) is a high-quality audit.  The results of this study are consistent with the model Wooten (2003) which states that outcame of audit quality is higher fee. These results are also in accordance with the results of the study Hoitash et al. (2007) which states that there is a significant positive relationship between the total fee to audit quality.  This may be explained that when the auditor early pioneering efforts in the field of audit, then the quality becomes the main thing that the auditor will seek to provide high quality audit and quality they are willing to pay the lower fee in hopes of getting a higher fee than the reputation that has been they wake up. Then over time, when the auditor already has a lot of experience and many clients, the fees a major consideration for accepting or rejecting the audit assignment. The impact is when the fee to be received is not as expected, the quality auditors deployed in the audit assignment is not maximal, otherwise when the fee to be received is great and as expected, the quality auditors in the audit assignment will be deployed more experienced auditors and specialists (full team).  Effect of Audit Quality Toward Good Reputation  Audit Quality and Reputation has a positive and significant relationship indicated by the value original sample estimate for 0.547 and T-statistics for 4.513 (greater than t-count, 1.96). This shows that to gain a good reputation, auditor (KAP) must send a signal to steakholders that the quality of audits provided by the auditor (KAP) is a high-quality audit. The results of this study are consistent with the model Wooten (2003) which states that outcame of audit quality is good reputation. In contrast to previous studies which examined the effect of reputation on audit quality as in the case above, it can be explained that when the auditor early pioneering efforts in the field of audit , then the quality becomes the main thing in building a good reputation so that the auditor will seek to provide high quality audit quality. Then over time, when the GSTF Journal on Business Review (GBR) Vol.2 No.4, July 2013134 © 2013 GSTF auditor already has a lot of experience and many clients, the auditor with a good reputation will try to maintain that they have built a reputation by providing high quality audit quality by deploying more specialized and experienced auditors.   Effect of Audit Quality Toward Lower Litigation  Audit Quality and Lower Litigation has a positive and significant relationship indicated by the value original sample estimate for 0.550 and T-statistics for 4.819 (greater than t-count, 1.96). This shows that to minimize litigation, auditor (KAP) must send a signal to steakholders that the quality of audits provided by the auditor (KAP) is a high-quality audit. The results of this study are consistent with the model Wooten (2003) which states that outcame of audit quality is lower litigation.  The results Palmrose (1988) indicated that non-Big Eight Firm as a group litigation activity higher than KAP Big Eight. These results are consistent with existing research supports the Big Eight as auditors of different quality.  Effect of Audit Quality Toward Higher Client Valuations  Audit Quality and Higher Client Valuations has a positive and significant relationship indicated by the value original sample estimate of 0.769 and the T-statistic for 17.496 (greater than t-count, 1.96). This shows that to increase the value of the company, auditee (Client) must send a signal to steakholders that the quality of audits provided by the auditor (KAP) is a high-quality audit. The results of this study are consistent with the model Wooten (2003) which states that outcame of audit quality is higher valuation client.  Table. Result for inner weight  Hypo thesis Test Original Sample Estimate Mean of Sub Sample Standard Deviation T- Statistic Result H1 Audit Quality → Fee 0.623 0.608 0.108 5.776 H1 accepted H2 Audit Quality → Litigation 0.550 0.562 0.114 4.819 H2 accepted H3 Audit Quality → Reputation 0.547 0.566 0.121 4.513 H3 accepted H4 Audit Quality → Client Valuation 0.769 0.778 0.044 17.496 H4 accepted   V.  CONCLUSION AND RECOMMENDATIONS   Based on the results above, it can be concluded that: 1. Quality significant positive effect on audit fees. This shows that to obtain fee higher, auditor (KAP) must send a signal to stakeholders that the quality of audits provided by the auditor (KAP) is a high-quality audit;  2. Quality audit significant positive effect on litigation. It is shown that by minimizing litigation, auditor (KAP) has given a signal to stakeholders that the quality of audits provided by the auditor (KAP) is a high-quality audit;  3. Quality audit significant positive effect on reputation. This shows that to gain a good reputation, auditor (KAP) must send a signal to stakeholders that the quality of audits provided by the auditor (KAP) is a high-quality audit;  4. Quality audit significant positive effect on value of the company. This shows that to increase the value of the company, the auditee (client) must send a signal to stakeholders that the auditor (KAP) used to produce a high quality audit.     The research was conducted in Indonesia and the results of this study may differ and do not apply in other countries. For policy makers (Regulator) : Continue to conduct oversight of the quality of services provided by the auditor (KAP). For Audit Services Users: Choose a high-quality auditor and have a MoU (listed as partners) with the parties concerned with the client (auditee).  For Auditor: In order to continue to maintain the quality of the audit. Due to high impact audit quality higher fees, lower litigation; good reputation, and higher client valuation. For the next researcher: (1) Use different theory; (2) Distributing questionnaires avoided the busy start of the year due to the auditor.  VI. ACKNOWLEDGEMENTS  Special thanks to my advisor for their support: Prof. Dr. Rahmawati, Dr. Payamta, and Dr. Bandi.  VII. REFERENCES  [1] Casterella, J. R., K. L. Jensen, and W. R. Knechel, 2009. Is Self-Regulated Peer Review Effective at Signaling Audit Quality?, The Accounting Review. 84 (3): 713-735. [2] Choi, J-H., J-B Kim, A. Qiu, and Y. Zang, 2007. Auditor locality, Audit Quality, and Audit Pricing, Working paper, Singapore Management University. [3] _____, C. (F.) Kim, J-B. Kim, and Y. Zang, 2010. Audit Office Size, Audit Quality, and Audit Pricing, Auditing: A Journal of Practice and Theory Vol. 29 (1): 73-97. [4] De Angelo, L. E., 1981. Auditor Size and Audit Quality, Journal of Accounting and Economic. 3: 183-199. [5] Francis J. R., 2004. What Do We Know About Audit Quality?, The British Accounting Review. 36: 345-368. [6] Hoitash, R., A. Markelevich and C. A. Barragato, 2007. Auditor Fees and Audit Quality, European Business Review. 19 (1): 40-71. [7] Krishnan, G. V., 2003. Audit Quality and the Pricing of Discretionary Accruals, Auditing: A Journal of Practice and Theory. 22 (1): 109. [8] Palmrose, Z. V., 1988. An Analysis of Auditor Litigation and Audit Service Quality, The Accounting Review. 63 (1): 55. GSTF Journal on Business Review (GBR) Vol.2 No.4, July 2013135 © 2013 GSTF [9] Watkins, A. L., and W. Hillison, and S. E. Morecroft, , 2004. Audit Quality: A Synthesis of Theory and empirical Evidence, Journal of Accounting Literature. 23: 153-193.  [10] Wooten, T. C., 2003, Research About Audit Quality, The CPA Journal. 73 (1): 48-51.     Muhamad Taqi is a Lecturer at Universitas Sultan Ageng Tirtayasa and several universities in Banten, Indonesia and is completing a doctoral program in economics concentration of auditing at Universitas Sebelas Maret (UNS) Solo, Indonesia. He works well as an internal auditor at Universitas Sultan Ageng Tirtayasa, external auditors on Registered Public Accountant Ishak, Saleh, Soewondo and Partners Jakarta and has been a consultant on SBU-Consulting Jakarta and a consultant at the Department of Education Banten Province, Indonesia.  GSTF Journal on Business Review (GBR) Vol.2 No.4, July 2013136 © 2013 GSTF

Consequences of Audit Quality in Signaling Theory Perspective

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Consequences of Audit Quality in Signaling Theory Perspective

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