The Effect of Reputation Public Accounting Firm on the Quality Audit and Audit Fee: Case in Indonesia

Abstract

This study analyzed KAP's management behavior on its reputation in providing financial reports
audit service. We suggest that the management of AF is using its reputation to provide non-superior audit
quality but charge premium fees. Samples of this study are audit services engaged by 625 companies listed
in IDX as of February 2019 for the year of 2013-2017. We utilized propensity-score matched-samples
methods to control the self-selection bias of companies in choosing their auditors. We found evidence that
KAP with a strong positive reputation, proxied by Big 4, was not providing superior audit quality compared
to others, but were charging higher fees. This information could be used as consideration for investors in
choosing the financial reports of auditors.