Audit Quality in Action: How It Shapes Company Value Amid Profitability Challenges

Abstract

Audit quality has traditionally been examined through quantitative indicators such as earnings management, financial reporting quality, and firm value. However, limited research has explored how key governance actors interpret audit quality and how it contributes to company value during periods of profitability volatility. This study investigates how audit quality is perceived and operationalized by auditors, financial experts, and corporate executives, drawing on Social Capital Theory and Habermas’ theory of communicative action. An interpretive qualitative design was adopted. Semi-structured interviews were conducted with six purposively selected participants comprising external auditors, senior financial experts, and chief financial officers from publicly listed companies in Indonesia. Interview data were analyzed using reflexive thematic analysis supported by NVivo 14, generating 47 initial codes, 12 analytical categories, and three overarching themes. The findings demonstrate that audit quality extends beyond technical assurance and functions as a multidimensional governance capability. First, audit quality operates as a protective governance mechanism by improving financial reporting reliability, facilitating early risk identification, and supporting evidence-based managerial decision-making. Second, it serves as symbolic and relational capital, strengthening stakeholder trust, governance legitimacy, and company value through greater transparency and credibility. Third, participants emphasized the need for adaptive and communicative audit practices, highlighting continuous auditor management communication, strategic advisory roles, and technology-enabled auditing as essential for maintaining organizational resilience during profitability volatility. This study contributes to the audit quality literature by providing qualitative evidence that complements predominantly quantitative research. The findings extend existing theory by integrating Social Capital Theory and Communicative Action Theory, demonstrating that audit quality creates organizational value not only through technical compliance but also through trust, legitimacy, and transparent communication. Practically, the study suggests that organizations should strengthen adaptive auditing, collaborative governance, and technology-supported assurance to enhance stakeholder confidence and sustain company value during financial uncertainty.