The Effect of Auditor Quality and Legislative Oversight on the Follow-up of Audit Recommendation and Audit Findings/Opinion

• In Event: Auditing 2

Abstract

The purpose of this study is to analyze direct and mediating effect of auditor quality and
legislative oversight on the follow-up of audit recommendations and audit findings/opinion. This
study uses Indonesia’s local governments’ financial statement from 2010-2012. The empirical
test result shows that there is a direct effect between auditor quality and legislative oversight on
the follow-up of audit recommendations, as well as indirect effect on audit findings/opinion.
High quality auditor is able to produce high quality recommendations that can be easily
followed by the audited entity. Strong legislative oversight encourages closer monitoring over
local government financial management so that local governments more committed to following
up the audit recommendation. The higher the audit recommendations are acted upon, the better
the quality of local government financial statements as shown by decrease in audit findings and
higher probability to achieve unqualified audit opinion.

Authors

• dyah setyaningrum, universitas indonesia

• Dwi Martani, Universitas Indonesia