The Influence of Ethics and Audit Risk on Audit Quality with Professional

Skepticism as a Moderating Variable: A Case in Public Accounting Firm (KAP)

located in Surabaya

Minor Thesis

Presented as Partial Fulfillment of the Requirements

for the Degree of Bachelor of Economics

By:

Fidela Luthfiana

145020307121004

INTERNATIONAL UNDERGRADUATE PROGRAM IN ACCOUNTING

DEPARTMENT OF ACCOUNTING
FACULTY OF ECONOMICS AND BUSINESS
UNIVERSITAS BRAWIJAYA
MALANG
2018
 TABLE OF CONTENTS

ACKNOWLEDGEMENT ...................................................................................... ii

TABLE OF CONTENTS ....................................................................................... iv

LIST OF TABLES ................................................................................................. ix

LIST OF FIGURES .................................................................................................x

LIST OF APPENDIXES ....................................................................................... xi

CHAPTER I: INTRODUCTION ............................................................................1

1.1 Research Background .....................................................................................1

1.2 Research Problem ..........................................................................................7

1.3 Research Objectives .......................................................................................7

1.4 Research Contribution ....................................................................................7

1.5 Thesis Structure .............................................................................................8

CHAPTER II: LITERATURE REVIEW AND HYPOTHESIS

DEVELOPMENT ....................................................................................................9

2.1 Auditing .........................................................................................................9

2.2 Audit Quality ............................................................................................... 10

2.3 Ethics ........................................................................................................... 14

2.4 Audit Risk .................................................................................................... 17

2.5 Professional Skepticism ............................................................................... 20

2.6 Hypothesis Development.............................................................................. 26

2.6.1 The Effect of Ethics on Audit Quality ............................................... 26

2.6.2 The Effect of Ethics on Audit Quality ............................................... 27

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 2.6.3 The Moderating Effect of Professional Skepticism on the Relation of

Ethics and Audit Quality ................................................................... 28

2.6.4 The Moderating Effect of Professional Skepticism on the Relation of

Audit Risk and Audit Quality ........................................................... 29

CHAPTER III: RESEARCH METHODOLOGY ............................................... 31

3.1 Research Type .............................................................................................. 31

3.2 Sample and Population ................................................................................. 31

3.3 Data Collection Method ............................................................................... 35

3.4 Variable and Research Measurement ............................................................ 36

3.4.1 Dependent Variable .......................................................................... 36

3.4.2 Independent Variables ...................................................................... 36

3.4.3 Moderating Variable ......................................................................... 38

3.5 Data Analysis Method .................................................................................. 40

3.5.1 Descriptive Statistic Analysis............................................................ 40

3.5.2 Validity and Reliability Test ............................................................. 40

3.5.2.1 Validity Test ......................................................................... 41

3.5.2.2 Reliability Test ...................................................................... 41

3.5.3 Moderated Regression Analysis ........................................................ 42

3.5.3.1 Regression Model ................................................................. 43

3.5.3.2 Coefficient of Determination ................................................. 44

3.5.3.3 F Test ................................................................................... 44

3.5.4 Classical Assumption........................................................................ 45

3.5.4.1 Normality Test ...................................................................... 45

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 3.5.4.2 Autocorrelation Test.............................................................. 46

3.5.4.3 Multicolinearity Test ............................................................. 46

3.5.4.4 Heteroscedasticity Test ......................................................... 47

3.5.5 Hypothesis Testing ........................................................................... 47

3.5.5.1 t Test ..................................................................................... 47

CHAPTER IV: DATA ANALYSIS AND RESEARCH RESULT ...................... 48

4.1 Data Collection Result.................................................................................. 48

4.1.1 Description of Respondents .............................................................. 48

4.1.2 Demographic Profile of Respondents ................................................ 49

4.2 Research Variable Description ..................................................................... 51

4.2.1 Distribution of the Frequency of Ethics Variable (X1) ....................... 51

4.2.2 Distribution of the Frequency of Audit Risk Variable (X2) ................ 51

4.2.3 Distribution of the Frequency of Professional Skepticism Variable

(X3) .................................................................................................. 52

4.2.4 Distribution of the Frequency of Audit Quality Variable (Y)............. 53

4.3 Validity and Reliability Test Result .............................................................. 54

4.3.1 Validity Test ..................................................................................... 55

4.3.2 Reliability Test ................................................................................. 57

4.4 Regression Analysis .................................................................................... 57

4.5 Classical Assumption of Result .................................................................... 58

4.5.1 Normality Test .................................................................................. 59

4.5.2 Autocorrelation Test ......................................................................... 60

4.5.3 Multicolinierity Test ......................................................................... 62

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 4.5.4 Heteroscedasticity Test ..................................................................... 64

4.6 Hypothesis Testing and Analysis .................................................................. 65

4.7 Research Result Discussion .......................................................................... 66

4.6.1 Ethics affects Audit Quality .............................................................. 67

4.6.2 Audit Risk affects Audit Quality ....................................................... 68

4.6.3 Professional Skepticism does not effect of Ethics on Audit Quality... 68

4.6.4 Professional Skepticism does not effect of Ethics on Audit Quality .. 71

CHAPTER V: CONCLUSION AND SUGGESTION ......................................... 74

5.1 Conclusion .................................................................................................. 74

5.2 Limitation ................................................................................................... 75

5.3 Recommendation ........................................................................................ 75

REFERENCES .......................................................................................................77

APPENDIXES ........................................................................................................ 81

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 LIST OF TABLES

Table 3.1: The List of KAP in Surabaya................................................................... 32

Table 4.1: Table of Returned Questionnaires............................................................ 48

Table 4.2: Overview of Demographic Profile of Respondents .................................. 50

Table 4.3: Distribution of the Frequency of Ethics Variable (X1) ............................. 51

Table 4.4: Distribution of the Frequency of Audit Risk Variable (X2) ...................... 52

Table 4.5: Distribution of the Frequency of Professional Skepticism Variable (X3) . 53

Table 4.6: Distribution of the Frequency of Audit Quality Variable (X1) ................. 54

Table 4.7: Variable Validity Test ............................................................................. 55

Table 4.8: Variable Reliability Test.......................................................................... 57

Table 4.9: Result of Multiple Regression ................................................................ 58

Table 4.10: Normality Test Result ........................................................................... 59

Table 4.11: Autocorrelation Test Result ................................................................... 62

Table 4.12: Multicolinierity Test Result ................................................................... 63

Table 4.13: Hypothesis test Result (Residual Test) ................................................... 67

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 LIST OF FIGURES

Figure 2.1: Professional Skepticism Continuum ....................................................... 25

Figure 2.2: Research Framework ............................................................................. 30

Figure 4.1: Normality Test Result ............................................................................ 60

Figure 4.2: Heteroscedasticity Test ......................................................................... 64

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 LIST OF APPENDIXES

Appendix 1: Frequency of Respondents’ Answers ................................................... 82

Appendix 2: Validity and Reliability Test ................................................................ 96

Appendix 3: Classical Assumption......................................................................... 104

Appendix 4: Multiple Linear Regression ................................................................ 106

Appendix 5: Moderated Regression 1 (Ethics with Professional Skepticism) ......... 108

Appendix 6: Moderated Regression 1 (Audit Risk with Professional Skepticism) .. 110

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