Auditors’ professionalism and factors affecting it: insights from Indonesia

Publication Date07 Oct 2019
AuthorEko Suyono,Omar Al Farooque
SubjectStrategy,International business
Auditorsprofessionalism and factors
affecting it: insights from Indonesia
Eko Suyono and Omar Al Farooque
Purpose This study aims to investigate the effects of intellectual intelligence, emotional intelligence,
internal locusof control, and auditors’ experience (intrinsic characteristics)and organizational culture (an
extrinsiccharacteristic) on auditors’ professionalism.
Design/methodology/approach Data are collected from auditorsworking in public accounting firms
in the Central Java and Yogyakarta provinces of Indonesiabetween March 1 and June 30, 2017, using
survey questionnaireswith a Likert scale (one-five). The ordinaryleast squares (OLS) regression method
is used to analyzethe data.
Findings Findings from OLSregression reveal that emotional intelligence,internal locus of control and
auditors’ experiencepositively influence auditors’ professionalism. However, intellectualintelligence and
organizationalculture do not show any effecton their professionalism.
Originality/value Even though there are some limitations, such as how to measure intellectual
intelligence, and the relatively small size of the sample, this study makes a significant contribution
because it is the firststudy to measure the joint effect of both intellectualand emotional intelligence and
the first to examine the influence on auditors’ professionalism of both individual and organizational
Keywords Emotional intelligence, Internal locus of control, Organizational culture,
Auditors’ experience, Auditors’ professionalism, Intellectual intelligence,
Indonesian public accounting firms
Paper type Research paper
1. Introduction
Professionalism is crucial for auditors, as professional behavior greatly determines the
success of an audit. Professional behaviour is more than a technical capability acquired
through practical experience over the years (Kaveh et al.,2014). The ultimate goal of the
auditing process is to issue an opinion on financial statements that will be useful as a
reference in the decision-making process. In fact, auditors provide assurance that the
financial statements are free from material misstatement, whether caused by fraud or error.
Failure to detect fraud, whether that failure is due to differing skills and objectives or due to
lack of appropriate training and skills to meet the requirements of the audit standards, is
entirely unprofessional. Therefore, auditors’ professional respect depends on expertise and
ability, on their knowledge (both technical and non-technical including communication,
interpersonal and problem-solving skills), on their experience and crucially, it depends on
their ethical standing in the workplace.
Nowadays, auditing attractsattention because in many cases after a company is audited by
a public accounting firm (hereafter, PAF) with a presumably professionalstaff, the company
has gone bankrupt. The Enron case (2001) is just one of many accounting scandals.
Auditors from Arthur Andersen PAF, one of the biggest in the world, violated their
professional code of ethics by manipulating the financial reporting of Enron Corporation
Eko Suyono is based at
Department of Accounting,
Universitas Jenderal
Soedirman, Purwokerto,
Omar Al Farooque is based
at UNE Business School,
University of New England,
Armidale, Australia.
JEL classication M14, M41
Received 6 March 2018
Revised 31 July 2018
14 January 2019
Accepted 23 May 2019
DOI 10.1108/JABS-03-2018-0073 VOL. 13 NO. 4 2019, pp. 543-558, ©Emerald Publishing Limited, ISSN 1558-7894 jJOURNAL OF ASIA BUSINESS STUDIES jPAGE 543
through commercial greed. Macey and Sale (2003) and Muzio et al. (2016) argue that the
internal governance structure of modern PAFs makes them more a business than a
profession, seeking short term profit rather than respect. Arthur Wyatt, a former managing
partner of Arthur Andersen and now a prominentcritic of the accounting profession, testifies
that greed causes accountants and auditors to deviate from professional ethics (Wyatt and
Gaa, 2004).
Furthermore, Wyatt and Gaa (2004) and also Thomson and Jones (2017) argue that non-
audit services, particularly management and tax consulting, compromise professional
standards and ethics, encouragingPAFs to prioritize commercial gain. Bailey (1995) argues
that professional ethics and values are relics of the golden era of the past, and are hard to
find in current practice. In other words, PAFs today are more likely to pursue commercial
gain than to commit themselves to their work (Gendron et al., 2006;Thomson and Jones,
2017). Of course, these deviations create a public outcry and concern.People question the
legitimacy of audits and their quality,asking what auditors’ professionalism really is and how
it works in the corporate sector.
This study questions the auditors themselves. In recent years, corporate scandals taint
large listed companies such as Indo Farma, Kimia Farma, and Bank of Century, and local
public accounting firms (Suyono, 2012). Intense public scrutiny of these scandals results in
the Indonesian Finance Ministry repealing the licensesof some PAFs and accountants.
Under the Indonesian Professional Standard of Public Accountancy, PAFs are regulated
and expected to uphold the professional ethics set by the Indonesian Institute of Certified
Public Accountants (Institut Akuntan Publik Indonesia, IAPI), to avoid unfair and unethical
practice. The Indonesian Public Accountant Code of Professional Ethics, Paragraph 1
Section 2, states that each member shall maintain integrity, objectivity, and independence
in their work. So, this study is timely. No published survey uses first-hand data collected
from practicing professional auditors on this topic. Primary data from the field can only
enhance the results. This studyfills a gap in the current literature.
Individual auditors possess intellectual intelligence, emotional intelligence, an internal locus
of control, and personal experience,while still being affected by their organization’s culture.
The population of this study is PAFs in Indonesia; this study uses a sample of auditors from
two provinces, Central Java and Yogyakarta.
Section 2 below discusses the theory, reviews the literature, and develops the hypotheses.
Section 3 provides information on research methodology and on the sample. Section 4
describes the data and findings. Section 5 gives conclusions and explores the implications
of the study.
2. Theory, literature review, and development of hypotheses
2.1 Theory and literature review
The theory of interpersonal behavior developed by Triandis in 1971 and cited by Moody
and Siponen (2013) underlies all professionalism. Personal behavior, Triandis says, is
determined by what people think will happen (attitude), by what they want todo (affect), by
what they think they should do (social rules), by what they often do (habits), and by what is
possible at the moment (facilitating conditions).
Attitude stems from a belief, while effect involves liking or disliking something. The auditor
has a professional obligation to be honest, both to the management and to other parties
such as clients, owners, creditors, and investors (Dillard and Ferris, 1989;Jenkins et al.,
2008). The individual or psychological aspects influence the auditor’s work, namely,
physical ability, mental ability, attitude, experience, perception, personality, habits, and
motivation. External aspects of the auditor’s background can be family, culture, and social

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