Government Audit Quality: Audit Expectation – Performance Gap
Asian Journal of Economics, Business and Accounting,
Page 373-386
DOI:
10.9734/ajeba/2022/v22i23881
Abstract
This paper seeks to explore the audit expectation and performance gap in the Indonesian government audit. This research utilized a qualitative approach involving three methods of data collection namely interviews, focus group discussions, and document analysis with a total of 32 government auditors of the Indonesian Supreme Audit Institution (BPK-RI). The data from all methods were analyzed through a qualitative thematic analysis framework. This research found that there are three types of occur in the context of Indonesian government audit quality namely deficient performance, deficient standards, and reasonableness gap.
Keywords:
- Government audit quality
- audit expectation
- performance gap
- deficient performance
- deficient standards
How to Cite
Hasibuan, D. H. M., Amyar, F., & Hidayah, N. N. (2022). Government Audit Quality: Audit Expectation – Performance Gap. Asian Journal of Economics, Business and Accounting, 22(23), 373-386. https://doi.org/10.9734/ajeba/2022/v22i23881
References
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Power MK. From common sense to expertise: reflections on the prehistory of audit sampling. Acc Organ Soc. 1992;17(1):37-62.
Porter B. An empirical study of the audit expectation-performance gap. Acc Bus Res. 1993;24(93):49-68.
Tiurmaida J, Murwaningsari E, Simanjuntak B, Mayangsari S. Determinant of Indonesia government financial reporting quality. J Bus Manag [review]. 2021;2(9):595-604.
Putri PK, Wibowo P. Government reporting and quality of public services: are they twins? J Acc Invest. 2023;24(1):1-24.
Coram P, Ferguson C, Moroney R. Internal audit, alternative internal audit structures and the level of misappropriation of assets fraud. Acc Fin. 2008;48(4): 080318002557372.
Herrbach O. Audit quality, auditor behaviour and the psychological contract. Eur Acc Rev. 2001;10(4):787-802.
Malone CF, Roberts RW. Factors associated with the incidence of reduced audit quality behaviors. Aud J Pract Theor. 1996;15(2):49-64.
Rhode JG. The Independent auditor’s work environment. New York: Comission on Auditors’ Responsibilities; 1978.
Alderman CW, Deitrick JW. Auditors perceptions of time budget pressures and premature sign offs: A replication and extension. Aud J Pract Theor. 1982;1(2):54-68.
Willett C, Page M. A survey of time budget pressure and irregular auditing practices among newly qualified UK chartered accountants. Br Acc Rev. 1996;28(2):101-20.
Kasigwa G, Munene JC, Ntayi J, Nkote I. Reduced audit quality behavior among auditors in UGANDA. Afr J Acc Econ Fin Banking Res. 2013;9(9).
Seliamang YM, Tapatfeto JD. The effect of competence and independence on audit quality with auditor’s ethics as a moderating variable. In: International Conference on Applied Science and Technology on Social Science. Vol. 2021. Atlantis Press; 2022, March. p. 823-8 (iCAST-SS; 2021).
Watkins AL, Hillison W, Morecroft SE. Audit quality: a synthesis of theory and empirical evidence. J Acc Lit. 2004;23:153-93.
Krishnan G, Schauer P. Differences in quality among audit firms. J Acc. 2001 (July);85.
Aldhizer GRI, Miller JR, Moraglio JF. Common attributes of quality audits. J Acc. 1995 (January):488-500.
Jevons Lee CJ, Liu C, Wang T. The 150-hour rule. J Acc Econ. 1999;27(2):203-28.
GAO. CPA quality: many governmental audits do not comply with professional standards. Washington, DC: General Accountability Office; 1986.
Knechel WR. Audit lessons from the economic crisis: Rethingking audit quality. In: Inaugural lecture. Maastricht University; 2009.
IAASB. International standard on auditing. In: ISA. Vol. 300 - Planning an Audit of Financial Statements. New York: International Federation of Accountants (IFAC); 2009a.
Sulaiman NA. Audit quality in practice: A study of perceptions of auditors, audit committee members and quality inspectors. Manchester: Manchester Business School Faculty of Humanities, University of Manchester; 2011.
Gray I, Manson S. The audit process. Principles, practice and cases. 5th ed; 2011.
Dunn J. Auditing theory and practice. 2nd ed. Essex, UK: Pearson Education Limited; 1996.
ICAEW. Audit quality: challenges for international consistency; 2010.
Margheim L, Pany K. Quality control, Premature Signoff, and Underreporting of Time: some Empirical Findings. Aud J Pract Theor. 1986;5(2).
Raghunathan B. Premature sign-off of audit procedures: an analysis. Acc Horiz. 1991;5(2):71-9.
Otley DT, Pierce BJ. Auditor time budget pressure: consequences and antecedents. Acc Aud Acc J. 1996a;9(1):31-58.
Kaplan SE. An examination of the effects of environment and explicit internal control evaluation on planned audit hours. Aud J Pract Theor. 1985;5(1):12-25.
Malsch B, Guenin-Paracini H, Tremblay M. Micro games of Power in auditing: getting comfortable with the auditee. In: 36th Annual Congress European Accounting Association Doctoral Colloquium. Paris, France; 2013.
Abbott A. Professional ethics. Am J Sociol. 1983;88(5):855-85.
En ligneAbbott A. Chicago: University of Chicago Press; 1988. System of Professions: an essay on the division of expert labor.
Healy PM, Palepu KG. Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. J Acc Econ. 2001;31(1-3):405-40.
Burns J, Fogarty J. Approaches to auditing standards and their possible impact on auditor behavior. Int J Discl Gov. 2010; 7(4):310-9.
Zhang P. The impact of the Public’s expectations of auditors on audit quality and auditing standards compliance. Contemp Acc Res. 2007;24(2):631-54.
Turley S, Cooper M. Auditing in the United Kingdom: a study of development in the audit methodologies of large accounting firms. London: Prantice Hall; 1991.
Schwartz R. Auditors’ legal liability, vague due care and auditing standards. Rev Quant Fin Acc. 1998;11(2):183-207.
Curtis EA. Business risk audit: A study of the relationship between audit methodology, audit practice and audit standards. Manchester: Faculty of Humanities, Manchester Business School; 2006.
Ferrier RJ. Auditing standards and guidelines. In: Sherer M, Turley S, editors. Current issues in auditing. London: Paul Chapman Publishing. 1991;99-111.
Carpenter B, Dirsmith M. Sampling and the abstraction of knowledge in the auditing profession: an extended institutional theory perspective. Acc Organ Soc. 1993; 18(1):41-63.
Eilifsen A, Willekens M. In the name of trust, audit quality and audit regulation in Europe. In: Quick R, Turley S, Willekens M, editors. Auditing, Tust and Governance: developing regulation in Europe. New York: Routledge; 2008.
Johnstone KM, Gramling AA, Rittenberg LE. Auditing: A risk-based approach to conducting a quality audit. 9th ed. OH: South-Western, Cengage Learning; 2014.
Anerud K. Harmonization of Financial Auditing Standards in the Public and Private Sectors - What Are the Differences? International Journal of Government Auditing. 2007;34 (4):17-21.
Boone JP, Khurana IK, Raman KK. Audit firm tenure and the equity risk premium. Journal of Accounting, Auditing & Finance 2008;23:115-140.
BPK. Standar Pemeriksaan Keuangan Negara (State Finance Auditing Standards) Jakarta: Badan Pemeriksa Keuangan Republik Indonesia (Indonesian Supreme Audit Institution); 2007.
Crous C, Lamprecht J, Eilifsen A, Messier W, Glover S, Prawitt D. Auditing and Assurance Services. 1st Sout African Edition ed: McGraw-Hill; 2012.
Davidson RA, Gist WE. Empirical Evidence on the Functional Relation between Audit Planning and Total Audit Effort. Journal of Accounting Research. 1996;34 (1):111-123.
Frankel RM, Johnson MF, Nelson KK. The relation between auditors’ fees for non- audit services and earnings management. The Accounting Review. 2002;77:71- 105.
GOI. Undang-Undang Republik Indonesia tentang Badan Pemeriksa Keuangan (Law of the Republic of Indonesia on the Audit Board of the Republic of Indonesia), edited by B. P. K. R. I. I. S. A. Organisation). Jakarta: Badan Pemeriksa Keuangan Republik Indonesia; 2006.
International Standard on Auditing. In ISA 500 - Audit Evidence. New York: International Federation of Accountants (IFAC); 2009b.
International Standard on Auditing. In ISA 230 - Audit Documentation; 2009c.
New York: International Federation of Accountants (IFAC).
A Framework for Audit Quality - Key Elements that Create an Environment for Audit Quality. New York: International Auditing and Assurance Standards Board; 2014.
INTOSAI. International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 30 - Code of Ethics. Copenhagen: International Organization of Supreme Audit Institutions; 1998.
International Standards of Supreme Audit Institutions. In ISSAI 300 Field Standards in Government Auditing. Copenhagen: International Organization of Supreme Audit Institutions; 2007a.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 1300 - Planning an Audit of Financial Statements. Stockholm: International Organization of Supreme Audit Institutions; 2007b.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 11; 2007c.
INTOSAI Guidelines and Good Practices Related to SAI Independence. Copenhagen: International Organization of Supreme Audit Institutions.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 1230 - Audit Documentation. Stockholm: International Organization of Supreme Audit Institutions; 2007d.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 10; 2007e.
Mexico Declaration on SAI Independence. Copenhagen: International Organization of Supreme Audit Institutions.
International Standards of Supreme Audit Institutions (ISSAI). In Audit Evidence - ISSAI 1500. Stockholm: International Organization of Supreme Audit Institutions; 2010.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 100 - Fundamental Principles of Public-Sector Auditing. Stockholm: International Organization of Supreme Audit Institution; 2013a.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI; 2013b.
200 - Fundamental Principles of Financial Auditing. Stockholm: International Ortganization of Supreme Audit Institutions.
Larcker DF, Richardson SA. Fees paid to audit firms, accrual choices, and corporate governance. Journal of Accounting Research. 2004;42:625-658.
Libby R, Artman JT, Willingham JJ. Process Susceptibility, Control Risk, and Audit Planning. The Accounting Review LX 1985;(2):212-230.
Libby R, Luft J. Determinants of Judgment Performance in Accounting Settings: Ability, Knowledge, Motivation, and Environment'. Accounting, Organizations and Society. 1993;18 (5):425-450.
Mock, T. J., and A. Wright. 1993. An Exploratory Study of Auditors' Evidential Planning Judgments. Auditing: A Journal of Practice & Theory 12 (2):39-61.
Nehme, R. H. 2013. Dynamics of Audit Quality Behavioural Approach and Governance Framework UK Evidence, Durham Business School, University of Durham, Durham.
Otley DT, Pierce BJ. The operation of control systems in large audit firms. Auditing. 1996;15(2):65.
Power M. Auditing, expertise and the sociology of technique. Critical Perspectives on Accounting. 1995 ;6(4):317-39.
Srinidhi BN, Gul FA. The differential effects of auditors’ non-audit and audit fees on accrual quality. Contemporary Accounting Research. 2007 ;(24):595-629.
Tepalagul N, Lin L. Auditor Independence and Audit Quality: A Literature Review. Journal of Accounting, Auditing & Finance. 2015;30 (I):101-121.
Ussahawanitchakit P. Effects of Audit Planning on Audit Quality of Certified Public Accountants (CPAs) in Thailand. Journal of Academy of Business and Economics. 2012;12 (3).
Porter B. An empirical study of the audit expectation-performance gap. Accounting and Business Research. 1993;24(93): 49-68.
Power MK. From common sense to expertise: reflections on the prehistory of audit sampling. Acc Organ Soc. 1992;17(1):37-62.
Porter B. An empirical study of the audit expectation-performance gap. Acc Bus Res. 1993;24(93):49-68.
Tiurmaida J, Murwaningsari E, Simanjuntak B, Mayangsari S. Determinant of Indonesia government financial reporting quality. J Bus Manag [review]. 2021;2(9):595-604.
Putri PK, Wibowo P. Government reporting and quality of public services: are they twins? J Acc Invest. 2023;24(1):1-24.
Coram P, Ferguson C, Moroney R. Internal audit, alternative internal audit structures and the level of misappropriation of assets fraud. Acc Fin. 2008;48(4): 080318002557372.
Herrbach O. Audit quality, auditor behaviour and the psychological contract. Eur Acc Rev. 2001;10(4):787-802.
Malone CF, Roberts RW. Factors associated with the incidence of reduced audit quality behaviors. Aud J Pract Theor. 1996;15(2):49-64.
Rhode JG. The Independent auditor’s work environment. New York: Comission on Auditors’ Responsibilities; 1978.
Alderman CW, Deitrick JW. Auditors perceptions of time budget pressures and premature sign offs: A replication and extension. Aud J Pract Theor. 1982;1(2):54-68.
Willett C, Page M. A survey of time budget pressure and irregular auditing practices among newly qualified UK chartered accountants. Br Acc Rev. 1996;28(2):101-20.
Kasigwa G, Munene JC, Ntayi J, Nkote I. Reduced audit quality behavior among auditors in UGANDA. Afr J Acc Econ Fin Banking Res. 2013;9(9).
Seliamang YM, Tapatfeto JD. The effect of competence and independence on audit quality with auditor’s ethics as a moderating variable. In: International Conference on Applied Science and Technology on Social Science. Vol. 2021. Atlantis Press; 2022, March. p. 823-8 (iCAST-SS; 2021).
Watkins AL, Hillison W, Morecroft SE. Audit quality: a synthesis of theory and empirical evidence. J Acc Lit. 2004;23:153-93.
Krishnan G, Schauer P. Differences in quality among audit firms. J Acc. 2001 (July);85.
Aldhizer GRI, Miller JR, Moraglio JF. Common attributes of quality audits. J Acc. 1995 (January):488-500.
Jevons Lee CJ, Liu C, Wang T. The 150-hour rule. J Acc Econ. 1999;27(2):203-28.
GAO. CPA quality: many governmental audits do not comply with professional standards. Washington, DC: General Accountability Office; 1986.
Knechel WR. Audit lessons from the economic crisis: Rethingking audit quality. In: Inaugural lecture. Maastricht University; 2009.
IAASB. International standard on auditing. In: ISA. Vol. 300 - Planning an Audit of Financial Statements. New York: International Federation of Accountants (IFAC); 2009a.
Sulaiman NA. Audit quality in practice: A study of perceptions of auditors, audit committee members and quality inspectors. Manchester: Manchester Business School Faculty of Humanities, University of Manchester; 2011.
Gray I, Manson S. The audit process. Principles, practice and cases. 5th ed; 2011.
Dunn J. Auditing theory and practice. 2nd ed. Essex, UK: Pearson Education Limited; 1996.
ICAEW. Audit quality: challenges for international consistency; 2010.
Margheim L, Pany K. Quality control, Premature Signoff, and Underreporting of Time: some Empirical Findings. Aud J Pract Theor. 1986;5(2).
Raghunathan B. Premature sign-off of audit procedures: an analysis. Acc Horiz. 1991;5(2):71-9.
Otley DT, Pierce BJ. Auditor time budget pressure: consequences and antecedents. Acc Aud Acc J. 1996a;9(1):31-58.
Kaplan SE. An examination of the effects of environment and explicit internal control evaluation on planned audit hours. Aud J Pract Theor. 1985;5(1):12-25.
Malsch B, Guenin-Paracini H, Tremblay M. Micro games of Power in auditing: getting comfortable with the auditee. In: 36th Annual Congress European Accounting Association Doctoral Colloquium. Paris, France; 2013.
Abbott A. Professional ethics. Am J Sociol. 1983;88(5):855-85.
En ligneAbbott A. Chicago: University of Chicago Press; 1988. System of Professions: an essay on the division of expert labor.
Healy PM, Palepu KG. Information asymmetry, corporate disclosure, and the capital markets: a review of the empirical disclosure literature. J Acc Econ. 2001;31(1-3):405-40.
Burns J, Fogarty J. Approaches to auditing standards and their possible impact on auditor behavior. Int J Discl Gov. 2010; 7(4):310-9.
Zhang P. The impact of the Public’s expectations of auditors on audit quality and auditing standards compliance. Contemp Acc Res. 2007;24(2):631-54.
Turley S, Cooper M. Auditing in the United Kingdom: a study of development in the audit methodologies of large accounting firms. London: Prantice Hall; 1991.
Schwartz R. Auditors’ legal liability, vague due care and auditing standards. Rev Quant Fin Acc. 1998;11(2):183-207.
Curtis EA. Business risk audit: A study of the relationship between audit methodology, audit practice and audit standards. Manchester: Faculty of Humanities, Manchester Business School; 2006.
Ferrier RJ. Auditing standards and guidelines. In: Sherer M, Turley S, editors. Current issues in auditing. London: Paul Chapman Publishing. 1991;99-111.
Carpenter B, Dirsmith M. Sampling and the abstraction of knowledge in the auditing profession: an extended institutional theory perspective. Acc Organ Soc. 1993; 18(1):41-63.
Eilifsen A, Willekens M. In the name of trust, audit quality and audit regulation in Europe. In: Quick R, Turley S, Willekens M, editors. Auditing, Tust and Governance: developing regulation in Europe. New York: Routledge; 2008.
Johnstone KM, Gramling AA, Rittenberg LE. Auditing: A risk-based approach to conducting a quality audit. 9th ed. OH: South-Western, Cengage Learning; 2014.
Anerud K. Harmonization of Financial Auditing Standards in the Public and Private Sectors - What Are the Differences? International Journal of Government Auditing. 2007;34 (4):17-21.
Boone JP, Khurana IK, Raman KK. Audit firm tenure and the equity risk premium. Journal of Accounting, Auditing & Finance 2008;23:115-140.
BPK. Standar Pemeriksaan Keuangan Negara (State Finance Auditing Standards) Jakarta: Badan Pemeriksa Keuangan Republik Indonesia (Indonesian Supreme Audit Institution); 2007.
Crous C, Lamprecht J, Eilifsen A, Messier W, Glover S, Prawitt D. Auditing and Assurance Services. 1st Sout African Edition ed: McGraw-Hill; 2012.
Davidson RA, Gist WE. Empirical Evidence on the Functional Relation between Audit Planning and Total Audit Effort. Journal of Accounting Research. 1996;34 (1):111-123.
Frankel RM, Johnson MF, Nelson KK. The relation between auditors’ fees for non- audit services and earnings management. The Accounting Review. 2002;77:71- 105.
GOI. Undang-Undang Republik Indonesia tentang Badan Pemeriksa Keuangan (Law of the Republic of Indonesia on the Audit Board of the Republic of Indonesia), edited by B. P. K. R. I. I. S. A. Organisation). Jakarta: Badan Pemeriksa Keuangan Republik Indonesia; 2006.
International Standard on Auditing. In ISA 500 - Audit Evidence. New York: International Federation of Accountants (IFAC); 2009b.
International Standard on Auditing. In ISA 230 - Audit Documentation; 2009c.
New York: International Federation of Accountants (IFAC).
A Framework for Audit Quality - Key Elements that Create an Environment for Audit Quality. New York: International Auditing and Assurance Standards Board; 2014.
INTOSAI. International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 30 - Code of Ethics. Copenhagen: International Organization of Supreme Audit Institutions; 1998.
International Standards of Supreme Audit Institutions. In ISSAI 300 Field Standards in Government Auditing. Copenhagen: International Organization of Supreme Audit Institutions; 2007a.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 1300 - Planning an Audit of Financial Statements. Stockholm: International Organization of Supreme Audit Institutions; 2007b.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 11; 2007c.
INTOSAI Guidelines and Good Practices Related to SAI Independence. Copenhagen: International Organization of Supreme Audit Institutions.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 1230 - Audit Documentation. Stockholm: International Organization of Supreme Audit Institutions; 2007d.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 10; 2007e.
Mexico Declaration on SAI Independence. Copenhagen: International Organization of Supreme Audit Institutions.
International Standards of Supreme Audit Institutions (ISSAI). In Audit Evidence - ISSAI 1500. Stockholm: International Organization of Supreme Audit Institutions; 2010.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI 100 - Fundamental Principles of Public-Sector Auditing. Stockholm: International Organization of Supreme Audit Institution; 2013a.
International Standards of Supreme Audit Institutions (ISSAI). In ISSAI; 2013b.
200 - Fundamental Principles of Financial Auditing. Stockholm: International Ortganization of Supreme Audit Institutions.
Larcker DF, Richardson SA. Fees paid to audit firms, accrual choices, and corporate governance. Journal of Accounting Research. 2004;42:625-658.
Libby R, Artman JT, Willingham JJ. Process Susceptibility, Control Risk, and Audit Planning. The Accounting Review LX 1985;(2):212-230.
Libby R, Luft J. Determinants of Judgment Performance in Accounting Settings: Ability, Knowledge, Motivation, and Environment'. Accounting, Organizations and Society. 1993;18 (5):425-450.
Mock, T. J., and A. Wright. 1993. An Exploratory Study of Auditors' Evidential Planning Judgments. Auditing: A Journal of Practice & Theory 12 (2):39-61.
Nehme, R. H. 2013. Dynamics of Audit Quality Behavioural Approach and Governance Framework UK Evidence, Durham Business School, University of Durham, Durham.
Otley DT, Pierce BJ. The operation of control systems in large audit firms. Auditing. 1996;15(2):65.
Power M. Auditing, expertise and the sociology of technique. Critical Perspectives on Accounting. 1995 ;6(4):317-39.
Srinidhi BN, Gul FA. The differential effects of auditors’ non-audit and audit fees on accrual quality. Contemporary Accounting Research. 2007 ;(24):595-629.
Tepalagul N, Lin L. Auditor Independence and Audit Quality: A Literature Review. Journal of Accounting, Auditing & Finance. 2015;30 (I):101-121.
Ussahawanitchakit P. Effects of Audit Planning on Audit Quality of Certified Public Accountants (CPAs) in Thailand. Journal of Academy of Business and Economics. 2012;12 (3).
Porter B. An empirical study of the audit expectation-performance gap. Accounting and Business Research. 1993;24(93): 49-68.
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