Strengthening Audit Quality Through Independence And Suspicion: Do Audit Fees Matter

Abstract

This study aims to analyze the influence of independence and professional suspicion on audit firm quality, with audit service imbalance serving as a moderating variable. A quantitative approach was employed, utilizing a survey method targeting auditors working at Public Accounting Firms (KAP) in Medan City. Data were collected via questionnaires distributed to 30 auditors and analyzed using Structural Equation Modeling-Partial Least Squares (SEM-PLS). The results indicate that independence has a positive and significant effect on audit firm quality; specifically, higher levels of Independence lead to higher audit firm quality. However, professional suspicion was not found to have a direct effect on audit firm quality, suggesting that the impact of auditor professionalism on audit firm quality occurs directly rather than through the mechanism of professional suspicion. Furthermore, audit service imbalance was not found to moderate the relationship between independence, professional suspicion, and audit firm quality, indicating that the magnitude of audit service imbalance neither strengthens nor weakens the influence of independence and professional suspicion on audit firm quality. This study contributes to the auditing literature by highlighting the importance of independence as a primary determinant of audit firm quality, surpassing behavioral or economic factors. Practical implications emphasize the need to strengthen Independence through continuing professional education, the cultivation of a skeptical mindset, the calibration of audit judgments, and the enhancement of audit firm quality control systems to ensure sustained audit firm quality.