DOI: 10.32602/jafas.2022.

024

The Effect of Auditor Independence and Complexity on Audit Quality and Its
Impact on the Reputation of the Auditor Institution – Survey of the Supreme Audit
Agency (BPK) Representative of South Sumatra
Heni Hafizaha Tertiarto Wahyudib Azwardic
a University of Sriwijaya, Postgraduate, Faculty of Economics, Henyhafizah@gmail.com
b University
…..… of Sriwijaya, Doctor Departement of Accontancy, Faculty of Economics,
teriwahyudi@gmail
c. University
…… of Sriwijaya, Doctor Departement of Economy, Faculty of Economics,
azwardi_unsri@yahoo.com

Keywords Abstract
Independence, Auditor Purpose: (i) Analyze and test the effect of auditor independence and
complexity on audit quality; (ii) Analyze and test the effect of auditor
Complexity, Auditor reputation in mediating independence and audit quality.
Reputation, Audit Methodology: This study uses descriptive analysis, a type of
Quality. quantitative research, which, when viewed from the data analysis
method used, uses a Likert scale measurement. This study uses
primary data sources. The survey method is distributing
Jel Classification questionnaires to auditors who work at BPK RI Representatives of
M14, M42, M42. South Sumatra.
Findings: Audit independence has a positive and significant effect on
Paper Type audit quality. the increasing independence of auditors will improve
Research Article audit quality, audit independence has a positive and significant effect
on the reputation of the institution. This is with increasing auditor
independence will improve the reputation of the institution, the
Received complexity of the audit has a positive and significant effect on audit
30.05.2022 quality means that every increase in audit complexity will improve
audit quality, audit complexity has a positive and significant impact
Revised on the reputation of the institution. This condition means that every
increase in audit complexity will increase the reputation of the
22.06.2022 institution. , Audit quality has a positive and significant effect on the
reputation of the institution. The condition means that every
Accepted increase in audit quality will improve the reputation of the
29.06.2022 institution
Originality/Value: This study is to improve the quality of the
financial auditing agency in the South Sumatra region in terms of
contributions regarding the independence and complexity of
auditors on audit quality and their impact on the reputation of the
auditor institution where it is necessary to increase audit complexity
in connection with improving audit quality in addition to audit
complexity. in accordance with the hypothesis, therefore the
formulation of further research for. The recommendations are
expected to be why audit complexity is proven to provide an
increase in audit quality and not the other way around. As for the
variables of independence and audit quality, it is proven to have a
positive effect on the reputation of the institution, thus
recommendations to the agency to improve the reputation of the
institution in terms of independence and audit quality.

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Introduction
Government administration is required to be responsible based on the enactment of
laws and regulations in a country based on the principles of compliance and justice
so that governance becomes orderly, economical, effective, and efficient. An
examination is a process of assessing the truth of financial information by identifying
problems, making analyses and evaluations objectively, professionally, and
independently so that the financial information has truth, credibility, accuracy,
reliable management of information, and financial accountability (UU RI No. 15 of
2004).
The Supreme Audit Agency (BPK) is an agency that has the authority to examine the
financial statements of a country, both central and regional governments (UU RI No.
15 of 2004). According to Law No. 15 of 2004, Law No. 6 of 2009, Law No. 24 of 2004,
and Law No. 21 of 2011, every year, BPK examines the Financial Statements (LK) of
entities consisting of LK central government entities, LK institutions/state
institutions, and local government LK. In Indonesia, the Supreme Audit Agency (BPK)
is defined as an institution that carries out independent audit activities on financial
reports carried out by regional governments. In assessing the financial performance
of local governments, BPK has an important role in carrying out its duties.
Comparison of liability reports is carried out for such audit processes. Local
Government Financial Reports (LKPD) with Regional Revenue and Expenditure
Budgets (APBD) based on Government Accounting Standards (SAP). The State Audit
Standards (SPKN) are issued by BPK to maintain the quality of BPK auditors by the
Regulation of the Supreme Audit Agency of the Republic of Indonesia No. 1 of 2007.
Important standards that become a reference in carrying out inspections (Landarica
& Arizqi, 2020).
Based on article 4 paragraph (2) explains that the BPK code of ethics must have
values based on integrity, independence, and professionalism as important
guidelines in state financial audits (SPKN, 2007). The performance of the auditor can
be seen from the basis of the code of ethics that the auditor has worked following the
standards. Cases of deviation will not occur if the application of standards and codes
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of ethics is carried out correctly and consistently pays attention to the basic values of
the code of ethics. Thus, auditors are required to act professionally and always
comply with applicable standards in the examination of the financial statements of
government and state-owned enterprises.
In practice, the credibility of the auditor is often questioned because in practice there
are still many various frauds and irregularities that are influenced by various causes
such as corruption and misappropriation of state finances even though audit
standards have been made and applied in conducting audits. Phenomena and
problems related to several findings, namely (1) the alleged finding of receipt of
bribes involving the BPK Auditor and officials from the Ministry of Villages and
Development in underdeveloped areas, the BPK Auditor allegedly accepting bribes
from the ministry officials so that the unqualified opinion (WDP) rose to Unqualified
(WDP) WTP).
At least seven people were detained by investigators from the Corruption Eradication
Commission (KPK) due to their connection to the alleged bribery case against the
Supreme Audit Agency (BPK) to give the Ministry of Villages PDTT an unqualified
title (WTP). (2) There is a bribery case by the former main auditor Rochmadi
Saptogiri who was sentenced to 7 years in prison and paid a fine of 300 million
Rupiah together with the head of the main sub-auditor for State Finance III BPK. The
bribery case was obtained from the Kemendes PDTT in the form of cash gratuities
amounting to 3.5 billion rupiahs and money laundering from PT Jaya Real Property
by buying land covering an area of 328 square meters in the South Tangerang area.
(3) There were findings in the construction of the Drinking Water Supply System
(SPAM) project, in the 2017-2018 fiscal year, that the Commissioner of PT Minarta
Dutahutama was suspected of bribing the Auditor Member IV of the RI BPK at the
Ministry of PUPmany problems are8 billion were later changed to Rp. 4.2 billion. In
the further development of the case, it was found that the alleged flow of Singapore
dollar funds by the private sector to members of the BPK RI amounted to 100,000
Singapore dollars. (3) There was an allegation to the BPK that the KPK found worth
Rp. 1 billion related to the flow of the Covid-19 social assistance fee to the BPK. Juliari
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Batubara, a former staff of the Minister of Social Affairs, testified that there was Rp 1
billion in money from the Covid-19 social assistance corruption which was handed
over to the BPK. Matheus also said the funds were channeled to various parties,
including officials from the Supreme Audit Agency (BPK). (4) There is an allegation of
collusion with the results of the BPK audit in the 2019 South Sumatra Provincial
Government Budget which was submitted by Deputy Maki. The initial finding of state
losses in the investigation of the Belitung Jaya - Nusa Bakti road project was
estimated to be Rp. 19 billion, but during the inspection of the project, the loss was
calculated to be only Rp. 1.9 billion.
The initial findings of the BPK audit on the inspection of the Dabok Rejo-Batas OKI
road project are thought to have reached Rp 15 billion. However, the calculation of
the results of the audit of state losses is estimated to be only Rp. 1.8 billion. The
current physical condition of the project is estimated to be almost 50% damaged. (5)
Chairman of the National Financial Accountability Agency (BAKN) DPR RI Wahyu
Sanjaya criticized the South Sumatra Province Representative BPK's exposure to the
implementation of the Special Allocation Fund (DAK) both physical and non-physical
in 2017-2020. Sees that the DAK budgeting process for the South Sumatra provincial
level it's not transparent yet. This research is the development of previous research
by (Landarica & rizqi, 2020) who researched the Effect of Independence, Moral
Reasoning, and Auditor Professional Skepticism on Audit Quality (Study at BPK-RI
Representatives of West Java). According to (Landarica & Arizqi, 2020) the results of
the study show that the higher the independence, moral reasoning, and professional
skepticism of auditors, the higher the audit quality produced. In this study, the
researcher made an update by adding an intervening variable as a variable that
strengthened the independent and dependent variables. The audit process must
provide information that is easily understood by the public or users of audited
financial statements. Ease of access to information and published documents related
to public sector audits must also be ensured. Then the relevance of the audit results
must be following the needs of the audit plan that has been made. Must have relevant
qualities in order to be able to influence public decisions through information on the
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assessment of past events, and present and affect forecasts in the future. In addition,
information must be useful and reliable so that it can be trusted and accounted for.
Empirically, the quality of BPK audits still needs to be improved and there are
problems related to the independence and complexity of BPK's audit tasks. Similar
studies generally examine the setting of Public Accounting Firms (KAP) or certain
industries so they cannot fully support this research (Sari Gultom, 2018); (Alam &
Suryanawa, 2017), (Saputra, 2016); (Dharmadiaksa & Utama, 2017). Meanwhile,
research that takes the setting of BPK is related to Audit Quality; (Sugiarmini &
Datrini, 2017); (Aryani et al., 2015), have not fully answered the same phenomenon
so it motivates the authors to be interested in conducting this research to prove the
extent to which the perception of independence and the complexity of the auditor's
task can affect the quality of audit results and their impact on the auditor's
reputation, by conducting research at the BPK Representative for South Sumatra.
Overall problems and phenomena can be concluded that many problems are
indicators of the low quality of the audit of the Indonesian Supreme Audit Agency
(BPK) which are the main points of the audit quality of the agency, this problem will
be studied more deeply related to the variables that determine audit quality
including the complexity of independence and audit quality. Based on previous
research, research has different studies, on if it is associated with the problem of low
audit quality so that the indicator takes one of the intervening variables, namely
audit reputation which can affect the audio quality of this agency as a whole. This
research has a novelty from the previous study, namely analyzing the quality of
auditors based on the role of state agencies, namely the State Audit Board (BPK) as a
public auditor who has the authority to examine the management and responsibility
of state finances, this is also a reference in model construction by taking the
Institutional Reputation variable. as a variable that mediates audit quality.
Based on the phenomena and gaps of previous research, this study will examine and
analyze the Effect of Auditor Independence and Competence on Audit Quality and
Auditor Reputation as an empirical study intervening variable at the Republic of
Indonesia Supreme Audit Agency Representative in South Sumatra.”
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Literature Review
DeFond & Zhang, (2014) Findings show that company audits carried out with quality
auditors will have an impact on increasing auditors, overall this condition is also
influenced by company regulatory intervention which will have an impact on auditor
independence and Liu, (2017) The findings show that with high-quality education
and advanced knowledge will make other auditors more careful with audit work with
large involvement. Mao et al., (2020) Findings show that the main auditors who often
rely on auditors when operating in various PCAOB countries say the quality of group
audits is good in disclosing as well as their participation in the group and their
responsibilities are known for the PCAOB sector. Form 2 does not accept the
disclosure responsibility. audit report and Gu et al., (2021) Findings show that IS
audit hours and are personnel have a statistically significant negative correlation
with the amount of discretionary accruals and a positive correlation with C Score
even when the group is divided into big 4 and non big 4.
Singh et al., (2019) Findings show NAS fees have a positive relationship with both
absolute and positive values of discretionary accruals with big 4 and according to
Hou et al., (2020) Findings show signatory auditors who have foreign experience in
influencing audit fees show significant and positive. Asante-Appiah, (2020) Findings
show that company reputation through ESG practices affects business processes and
controls as well as risks in company continuity and according to
Xiao et al., (2020) Findings show audit effort significantly increases the likelihood of
audit adjustments.
Suwarno Endro et al., (2018) Findings show that audit fees, audit period, audit
rotation and auditor reputation have no effect on audit quality and according to
Butar-Butar & Lily Indarto, (2018) The findings show the role of specialist auditors in
improving financial quality. significant impact on industry complexity.
Sun et al., (2020) Findings show related group affiliation in audit quality has an
influence in regulators regarding fraudulent financial reporting and according to
Putri et al., (2021) Findings show that audit tenure auditor experience and

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independence have a positive relationship significant effect on audit assessment and

complexity.
Qodri et al., (2019) The findings show that apart from the ability of the auditor to
investigate themselves, the complexity of the auditor's task and the role of the
whistleblower play an important role in the effectiveness of audit procedures in
investigations and according to Rapley et al., (2021) the findings show a significant
effect relationship of tenure disclosure on investment intentions are in line with
audit quality in CAM disclosures to identify relative arrangements.
Blaufus et al., (2021) The findings show that, compared to the cooperative auditor
negotiation strategy, the competitive auditor negotiation strategy is associated with
significantly higher valued additional taxes and according to Hung & Cheng, (2018)
The findings indicate that information asymmetry, i.e. Increased complexity of
corporate information reduces information transparency, and thereby increases
information asymmetry between managers and auditors, resulting in higher audit
risk.
Booker, (2018) Findings show that users of financial statements use client interests
as a measure of audit quality when revenue streams are not the same across clients,
and according to Le et al., (2021) Findings show that firms audited by Big Four
Auditors are associated with the cost of equity lower than firms with non-Big Four
auditors. The results show that the role of auditor information is more relevant than
the role of insurance in the context of civil law with a relatively low risk of auditor
litigation. Sarhan et al., (2019) Findings show that board independence is positively
associated with involving the big 4, while family share ownership shows a negative
relationship with hiring Big 4 auditors and for board size, board independence, and
director share ownership are positively associated with audit fees and according to
Yang et al., (2018) The findings show that the audit quality of signed auditors shows
a significant gender difference: this significant gender difference is different from
whereas female auditors can provide higher audit qualifications than male auditors.

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Framework
Demand Drivers Supply Drivers

Client Risk Agency Auditor Risk AUDIT

Strategies Conflicts Mgt Strategies FEE

Audit Quanlity

Auditor Reputation Auditor Monitoring Strength

- Perceived Competence - Auditor Competence
- Perceived Independence - Auditor Independence

Product of Audit Quality

Information Credibility Information Quality

Financial Statements

Figure 1: Thinking Framework

Results of another study by Hou et al., (2020) prove that perceived independence
affects the reputation of the audit profession, which is related to whether auditors
perform non-audit services for the same auditee. Based on research by DeFond &
Zhang, (2014), Qodri et al., (2019), Rapley et al., (2021), Blaufus et al., (2021), Blaufus
et al., (2021), Xiao et al. , (2020), the researcher proposes a hypothesis that Auditor
Independence has a positive influence on the reputation of the institution through
audit quality, because the more independent the auditor, the higher the reputation of
the institution, which is marked by the better audit quality.
The Research Tool
This study uses descriptive analysis, a type of quantitative research, which, when
viewed from the data analysis method used, uses a Likert scale measurement. This
study uses primary data sources. Survey method, which is distributing
questionnaires to auditors who work at BPK RI Representatives of South Sumatra.
Sources of data used in this study are primary data and secondary data. The primary

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data in this study were interviews, questionnaires and the characteristics of the
respondents. While secondary data includes information data based on online
publications, information related to research variables in related articles and books.
The Sample Population
The population in this study are auditors who work at BPK RI Representatives of
South Sumatra, the method of sampling is the probability sampling, the sampling
technique used is stratification random sampling, which is taking a proportionate
sample by taking subjects from each strata or each region is determined in balance
with the number of subjects in each strata or region (Ghozali, 2016). Determination
of the number of samples is determined using the Slovin formula with the number of
samples as much as 103 which can be seen in table 1 as follows:
Table 2 Total Human Resources in South Sumatra Representative BPK
Nurmer of
Nurmer Proportion
No Position Samples
(Persons) (%)
(Persons)
1. Head of Sub-auditor 2 1.4 1
2. Chief representative 1 0.7 1
3. Head of Representative 1
Secretariat 0.7 1
4. Head of subsection 5 3.6 4
5. Secretariat Staff 49 35.5 37
6. Pemeriksa 80 58.0 60
Total 138 100 103
Source: The Financial Examiner Agency, South Sumatra Region (2022) (processed)
Analytical techniques in this research are qualitative analysis and quantitative
analysis. Quantitative analysis is carried out using statistical testing from the results
of the questionnaire, then the test results will be explained using sentences, in other
words, quantitative data is used first and then followed by qualitative data.
Quantitative data is used to view the questionnaire using tabulations and assisted by
Statistical Product And Service Solutions (SPSS) in the form of an assessment of the
results of filling out the questionnaire.
The statistical method used to test the hypothesis in this study is Partial Least Square
(PLS). The PLS method is used in research for several reasons (1) this statistical
method is appropriate to test the predictive effect of the relationship between latent

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variables in a model (2) PLS can be run on a small number of samples, does not
require data to be normally distributed, and can test the research model with a weak
theoretical basis (Ghozali, 2016). (3) PLS can combine regression methods and factor
analysis in one statistical technique (Ghozali, 2016). (5) Path analysis can be directly
carried out in one test because PLS is able to analyze graphs at once and researchers
can analyze in detail the indicators of the strongest and weakest latent variables.
Data Analysis
Qualitative data was collected through both the open-ended questions asked during
the interviews and through the interviewees’ remarks in justifying their ratings to
the Likert scale questions. Such qualitative data was analysed by summarising the
transcripts of the responses for each question in the interview schedule. This allowed
for easier evaluation and for the key similarities and differences in responses to be
noted. Quantitative data gathered through the responses to the closed-ended
questions in the interview schedule was analysed through SmartPLS and IBM SPSS
Statistics.
Research Limitations
One of the main limitations in this study is the problem that is an indicator of the low
quality of the audit of the Indonesian Supreme Audit Agency (BPK) which is the main
point of the audit quality of the agency, this problem will be studied more deeply
related to the variables that determine audit quality including the complexity of
independence and quality audits.
Findings and Discussion
Path Diagram Construction
research model was first described using the SmartPLS 3.3.3 application with the
path diagram construction. In SmartPLS 3.3.3 the latent variable is depicted in the
form of a blue circle, and the indicator is depicted in the form of a yellow box. Figure
2 shows the path diagram in the SmartPLS 3.3.3 application. According to Hair et al.,
(2014) there are two analyzes carried out in the use of the PLS method, namely the
model (measurement model) and inner model (structural model)

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Figure 2: Path Diagram Construction

Source: The data is processed by the author using SmartPLS (2022) (processed)
Test Outer Model (Measurement Model)
Testing the measurement model consists of measuring convergent validity,
discriminant validity, composite reliability, and Cronbach's Alpha. Testing the
convergent validity by looking at the outer loadings. Next, discriminant validity
assessed based on Average Variance Extracted (AVE) of each construct with
correlations between other constructs in the model. The reliability test is seen based
on the composite reliability. In addition, Cronbach Alpha is carried out to ensure that
the measurement statement provides adequate coverage of the research statement
to be measured.
Convergent Validity
The convergent validity test was then carried out by looking at the AVE value of each
construct. Convergent validity is used to evaluate whether a measurement has a
positive correlation with alternative measurements of the same construct (Hair et al,
2014). To evaluate convergent validity, the value that must be evaluated is the AVE
value, if the AVE is above 0.5, it means that half the variance in the indicator has been
defined by the construct being measured or meets convergent validity.

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Table 2 Score Average Variance Based (AVE)

Average Variance Extracted
(AVE)
Auditor Independence 0.533
Audit Complexity 0.659
Audit Quality 0.665
Institutional Reputation 0.471
Source: Processed Data (2022) (processed)
Based on the AVE calculation in table 2 in general, it shows the value of the latent
variable AVE value > 0.5 so that it meets convergent validity, and only the
institution's reputation variable that shows an AVE < 0.5, this does not make this
research variable less good because in testing the validity of construct validity it can
still be seen with other approaches, for testing discriminant validity it is also
necessary conducted in addition to the AVE to see that the association between
indicators or dimensions in the construct is higher than the other constructs.
Discriminant Validity
Test Discriminant validity can be seen from the square root value of AVE. According
to Hair et al., (2014) evaluation of discriminant validity is used to measure the extent
to which a construct is different from other constructs in empirical standards.
Fornell-Larcker (1981) compared the square root of the AVE value with the
correlation of the latent variables in this study. The results of the Fornell-lacker
criterion test can be seen in the following.
Table 3 Fornell-Larcker Criterion
Auditor Audit Audit Institutional
Independence Complexity Quality Reputation
Auditor Independence 0.730
Audit Complexity 0.938 0.812
Audit Quality 0.852 0.946 0.815
Institutional Reputation 0.821 0.884 0.966 0.687
Source: Processed Data (2022) (processed)
Based on the test results, it is known that the AVE root value is higher than the
correlation between constructs, so that it can be concluded that the construct has
discriminant validity.

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Composite Reliability
In addition to the validity test, a construct reliability test was also conducted which
was measured using two criteria, namely composite reliability and Cronbach's Alpha.
A latent variable must have a Cronbach's Alpha value above 0.7 or composite
reliability greater than 0.7 to meet reliability. According to Chin (1998) composite
reliability is a closer approximation that is more accurate, so the reliability
evaluation is carried out based on Cronbach's Alpha and composite reliability values.
Based on table 4.10, it is known that all constructs have Cronbach's Alpha and
Composite Reliability values above 0.7, which means that all constructs are reliable.
Table 4 Fornell-Larcker Criterion
Cronbach's Composite
Alpha Reliability
Auditor Independence 0.895 0.918
Audit Complexity 0.912 0.930
Audit Quality 0.942 0.954
Institutional Reputation 0.790 0.827
Source: Processed Data (2022) (processed)
Then, the convergent validity test was carried out by looking at the AVE value of each
construct. Convergent validity is used to evaluate whether a measurement has a
positive correlation with alternative measurements of the same construct (Hair et al,
2014). To evaluate convergent validity, the value that must be evaluated is the AVE
value, if the AVE is above 0.5, it means that half the variance in the indicator has been
defined by the construct being measured or meets convergent validity. Based on
Table 4. shows that the AVE value of all independent variables including Auditor
Independence, Audit Complexity, Audit Quality, Institutional Reputation has an AVE
value greater than 0.05.
In the next stage, discriminant validity testing also needs to be carried out in addition
to the AVE to see that the attachment between indicators or dimensions in the
construct is higher than other constructs. The discriminant validity test can be seen
from the square root value of AVE. According to Hair et al., (2014) evaluation of
discriminant validity is used to measure the extent to which a construct is different
from other constructs in empirical standards. Fornell-Larcker (1981) compared the

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square root of the AVE value with the correlation of latent variables in this study. It
was found that the AVE root value was higher than the correlation between the
constructs of audit quality (0.942 < 0.954) and Institutional Reputation (0.790 <
0.827), so it can be concluded that the construct has good discriminant validity.
Inner Model (Model Structural)
After testing the measurement model , the next step is to analyze the structural model
or inner model. The measurement parameters used to measure the structural model
are p-value, t-value, and the value of the coefficient of determination (R²).
Model Feasibility Analysis (Goodness of Fit)
The test of the model's feasibility analysis or goodness of fit is used to determine
whether the model is worthy of research or not by looking at the results of the
research conducted in the following table:
Table 5 Result Test R
R Square R Square
Adjusted
Audit Quality 0.906 0.904
Institutional Reputation 0.954 0.952
Source: Processed Data (2022) (processed)
Based on Table 5 Audit quality is influenced by the independence and reputation of
the institution by 95.40 percent in addition to other variables showing a small R
Square value which results in display results which does not appear in the R2 test .
but this is not a reference because this variable is another connecting variable, then
another model is tested using the Cross Validated Redundancy (Q2), Effect Size (F2)
and Fit Index (NFI).
Cross Validated Redindancy (Q2)
Based on table 6 the Q² test was used as a means to assess the model's predictive
relevance. Values greater than zero for a particular endogenous construct indicate
the predictive relevance of the path model for this particular construct (Hair et al.,
2014). Test Q2 are above 0 so that a decision can be made that the structural model
has a prediction of relevance. In the PLS-SEM method, the Q² evaluation is carried out
using the blind folding through the Smart PLS application.
Table 6 Test Results Q2
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SSO SSE Q² (=1-

SSE/SSO)
Auditor Independence 1056.000 589.668 0.442
Audit Complexity 672.000 306.297 0.544
Audit Quality 1056.000 422.569 0.600
Institutional Reputation 672.000 424.262 0.369
Source: Processed Data (2022) (processed)
Effect Size Test (F2)
Effect Size (F2), if The F2 value ofin 0.02 is categorized as small, 0.15 is categorized
as medium and 0.35 is categorized as large. The F2 value: this study can be seen in
table 7.
Table 7 Result Test F2
No F-Square Description
1 Auditor Independence=>Audit Quality 0.113 Small
2 Audit Complexity=> Audit Quality 1.913 Big
Auditor Independence=>Reputation of
3 0.249 Medium
Institution
4 Audit Complexity=>Institutional Reputation 0.433 Medium
5 Audit Quality=>Institutional Reputation 3.690 Big
Source: Processed Data (2022) (processed)
Shows that the Auditor Independence variable on Audit Quality has an F value of7
0.113 so it is concluded that it has a small effect, while for Auditor Independence on
the Institution's Reputation it has a value of 0.249 which means it has a medium
effect. The same thing is also known by the Audit Complexity of the Institution's
Reputation of 0.433, so it can be concluded that the latent variable has a medium
effect because the value above > 0.15 or 0.433, the display of different results is
shown by the Audit Complexity variable on Audit Quality of 1.913 which has a large
effect and Audit Quality on the Institution's Reputation. by 3.6 90.
Based on the F2 test, Audit Quality shows that the variable is able to mediate other
variables because on average all variables are only the variable of the effect of
auditor independence on audit quality showing a small effect or < 0.02. Thus it can be
assumed that each model variance has an influence on auditor reputation, in addition
to using the F square results in testing the feasibility of the model, it also uses the Fit
model analysis which can be seen in table 8.

Table 8 Result Analysis Model Fit

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Saturated Estimated
Model Model
SRMR 0.101 0.101
d_ULS 6.805 6.805
d_G n/a n/a
Chi-Square infinite infinite
NFI n/a n/a
Source: Processed Data (2022) (processed)
Result of model fit analysis shows NFI (n/a) cannot be calculated This can happen
because the respondent's answers are almost the same which makes the data pile up,
but this does not make a problem that must be addressed because when viewed on
the Standardized Root Mean Square Residual (SRMR) = 0.1 < level 10 percent or 0.1
percent model will be considered suitable or can be judged to have a correlation
match, based on this, according to (Hu & Bentler, 1999) that the assessment of the
compatibility between the observed correlations/relationships can be said to be a
feasible or good model.
Hypothesis
In addition to looking at the coefficient of determination, the next step is to test the
hypothesis by looking at the value of the t-value on each path coefficient. there is a
significance level of 0.05 a hypothesis will be accepted if it has a t-value greater than
1.65 (Latan & Ball, 2012). Summarizes the results of the evaluation of the structural
model based on the t-value and indirect. Meanwhile, based on direct testing, it can be
seen that all dimensional variables are directly significant to the latent variables in
table 9.
Table 9 Result Test F2
T P
Description Kesimpulan
Statistics Values
Auditor Independence -> Audit
3.083 0.002 Significant Hypothesis Accepted
Quality
Audit Complexity -> Audit Quality 13.374 0.000 Significant Hypothesis Accepted
Audit Quality -> Institutional
17.343 0.000 Significant Hypothesis Accepted
Reputation
Auditor Independence ->
3.686 0.000 Significant Hypothesis Accepted
Institutional Reputation
Audit Complexity -> Institutional
4.836 0.000 Significant Hypothesis Accepted
Reputation
Source: Processed Data (2022) (processed)

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H1 : Auditor Independence has a positive effect on Audit Quality.

H2 : The complexity of the audit task has a positive effect on audit quality.
H3 : Audit quality has a positive effect on the reputation of the institution.
H4 : Auditor independence has a positive effect on the reputation of the institution.
H5 : Audit quality has a positive effect on the reputation of the institution

Table 10 Result Test F2

T P
Description Kesimpulan
Statistics Values
Audit Complexity -> Audit Quality -> 10.213 0.000
Significant Hypothesis Accepted
Institution Reputation
Independensi Auditor -> Kualitas 3.000 0.003
Significant Hypothesis Accepted
Audit -> Reputasi Lembaga
Source: Processed Data (2022) (processed)
H6 : Auditor Independence has a positive effect on Audit Quality
H7 : The complexity of the audit task has a positive effect on audit quality.

Sobel Test
Table 11 Direct Effects on Institutional Reputation
Unstandardized Standardized
Model Coefficients Coefficients t Sig.
B Std. Error Beta
(Constant) a 8.165 1.465 5.575 .000
Auditor Independence .350 .098 .199 1.126 .263
Audit Task Complexity .471 .212 .260 .989 .325
Audit Quality .481 .086 .908 5.604 .000

Source: Processed Data (2022) (processed)

It is known that the effect of direct analysis is that from the table above the
significance value of the variable can be known as follows.
1. Auditor Independence Variable has a variable significance value of 0.263 (> 0.05),
so it can be concluded that this variable has no direct significance to the
reputation of the institution.
2. The Auditor's Task Complexity variable has a significance value of 0.325 (>0.05),
so it can be concluded that this variable has no direct significance to the
reputation of the institution.
3. The audit quality variable has a variable significance value of 0.000 (> 0.05), so it
can be concluded that this variable has a direct significance to the reputation of
the institution.

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Broadly speaking, the variables show results that are very contrary to the previous
test. This is because this test uses the output variable value. the total of each variable
while the previous test changed the dependent variable which resulted in testing a
large gap between the significance values, but for the value of the audit quality
variable it showed a positive consistency of influence on the reputation of the
institution after testing the effect of each variable on reputation to determine the
audit quality variable. can mediate all variables on auditor reputation can be seen in
the table below.
Table 12 Direct Effects on Audit Quality
Unstandardized Standardized
t Sig.
Model Coefficients Coefficients
B Std. Error Beta
(Constant) b 1.250 1.773 .705 .483
Auditor Independence .290 .098 .308 3.292 .001
Audit Task Complexity 1.531 .157 1.002 9.719 .000
Institutional Reputation .530 .094 .280 5.604 .000

Source: Processed Data (2022) (processed)

Note: (b) Dependent Variable, namely Audit Quality

From the table of regression results, it shows that the probability value of the
variable shows a positive and significant direction for all variables on the audit
quality variable, so based on the previous test which is the basis for calculating the
Sobel test value, it can be seen that in the Sobel test there is a basis for taking in this
case the hypothesis used. which can be known as follows.

Basic for Decision Making

1. If the value of z < 1.96 then it is declared unable to mediate the relationship of the
influence of the independent variable on the dependent variable
2. If the value of z > 1.96 then it is declared capable of mediating the relationship of
the influence of the independent variable on the dependent variable

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Table 13 Sobel Test Reference Calculation

Nilai Coefficients a Nilai Coefficientsb
Variabela Variabelb Std Std
Unstandarsized Unstandarsized
Error Error
Auditor Independence on Auditor
Institutional Reputation Independence on .350 .098 .290 .098
Audit Quality
The Complexity of Audit The Complexity of
Tasks on the Reputation of Audit Tasks on .471 .212 1.531 .157
the Institution Audit Quality
Audit Quality on Institution's
Institutional Reputation Reputation on .481 .086 .530 .094
Audit Quality
Source: Processed Data (2022) (processed)
Table 14 Sobel Test Calculator Results
No Z-Statistic P-Value Kesimpulan
1 2.27863523 0.02268876 Hypothesis Accepted
2 2.16618999 0.03029667 Hypothesis Accepted
3 3.97077488 0.00007164 Hypothesis Accepted
Source: Processed Data (2022) (processed)
Note: (1-3) Unstandardizeda, Std Errora and Unstandarsizedb, Std Error using quantpsy.org

Based on the results of the Sobel test calculation, it is known that the entire Z stat
value is in the range of 2-3, because the z value obtained is more than 1.96 with a
significant level of 5%, it can be said that the evidence according to the Sobel test can
be interpreted that audit quality is able to mediate the relationship between auditor
independence and the complexity of the audit task on the reputation of the
institution.

Cross Tabulation
Analysis Cross tabulation analysis discusses the relationship descriptively with
independent variables including auditor independence, task complexity, audit quality
and institution reputation.
Table 15 Relationship of Auditor Independence and Institutional Reputation
Auditor Independence Institutional Reputation Total
Low High
Low Count 20 26 46
% of Total 19.4% 25.2% 44.6 %
High Count 12 45 57
% of Total 11.6% 43.7% 55.3%
Total Count 32 71 103
% of Total 31.1 % 69.9% 100 %
Source: Processed Data (2022) (processed)

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Based on Table 15 shows that of the 71 respondents who answered questions from
the questionnaire distributed regarding the reputation of the institution, as many as
32 people responded to the questionnaire questions in the category of low auditor
independence, as many as 20 people (19.4 percent). The opposite condition shows
that as many as 45 people (43.7 percent) answered the questionnaire in the category
of high institutional reputation with 12 respondents answering the auditor's
independence in the low category. The next analysis explains the relationship
between task complexity and the reputation of the institution which is described in
Table 16. The last discussion is related to the relationship between audit quality and
the reputation of the institution which is described in Table 17.

Table 16 Relationship between Task Complexity and Institutional Reputation

Kompleksitas Tugas Reputasi Lembaga Total
Rendah Tinggi
Rendah Count 18 28 46
% of Total 19.4% 25.2% 44.6 %
Tinggi Count 21 36 57
% of Total 20.4% 34.9% 55.3%
Total Count 39 64 103
% of Total 37.9% 62.1% 100 %

Source: Processed Data (2022) (processed)

Based on Table 16 shows that of the 39 respondents who answered questions from
the questionnaire distributed regarding the complexity of the task, 21 people
responded to the questionnaire with high task complexity and 36 people (34.9
percent) responded to the high reputation of the institution. Meanwhile, 28 people
(25.2 percent) answered the questionnaire in the category of high institution
reputation with 12 respondents answering low task complexity. The last discussion
is related to the relationship between audit quality and the reputation of the
institution which is described in Table 17.
Table 17 Relationship between Task Complexity and Institutional Reputation
Kualitas Audit Reputasi Lembaga Total
Rendah Tinggi
Rendah Count 15 31 46
% of Total 14.6% 30,0% 44.6 %
Tinggi Count 24 33 57
% of Total 23.3% 32.0% 55.3%
Total Count 39 64 103
% of Total 37.9% 62.1% 100 %
Source: Processed Data (2022) (processed)

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Based on Table 17 shows that of the 39 respondents who answered questions from
the questionnaire distributed related to audit quality, 24 people (23.3 percent)
responded to the questionnaire with high audit quality and 33 people (32 percent)
responded to the reputation of the institution. tall one. Meanwhile, 33 people (32.0
percent) answered the questionnaire in the category of high institutional reputation
with 15 respondents answering low auditor independence.
Direct Effect Analysis
The Effect of Auditor Independence on Audit Quality
Based on the estimation results indicate that auditor independence has a significant
effect based on the T statistic value which is greater than t-table. Thus, every increase
in auditor independence will improve audit quality. This result is in line with some of
Liu's research, (2017) which explains that independence has a good impact on audit
quality because audits can only be effective and quality if the auditor shows an
independent attitude and is trusted to report any breach of contract between the
principal and the agent. Furthermore, Mao et al., (2020) prove that the perception of
the Director of Finance in auditee companies on auditor independence (perceived
independence) has a positive impact on audit quality, as long as the auditor does not
perform non-audit services for the same client and does not have a close personal
relationship. between the client and the auditor. This is explained in general, the
relationship between auditor independence and audit quality explained that 71
respondents answered questions from the questionnaire distributed regarding the
reputation of the institution as many as 32 people responded to the questionnaire
questions with the category of low auditor independence, namely as many as 20
people (19.4 percent). On the other hand, 45 people (43.7 percent) answered the
questionnaire in the category of high institution reputation. In general, this explains
the relationship, the cross tabulation analysis explains the close relationship related
to the respondents' responses, which in the majority show the reputation of
institutions with high categories having high audit quality overall.
Theoretically, it is explained that auditor independence is often referred to as the
cornerstone or foundation of the auditing profession and is a critical and unique
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precondition for providing attestation services because independence is the

foundation for public trust in the attestation of auditors Singh et al., (2019). Auditor
independence helps ensure audit quality and contributes positively to convincing
users of financial statements regarding the financial reporting process so as to create
an efficient capital market. deviations or will not even report any of these 51
violations or irregularities in their audit reports. Putri et al., (2021) in their research
conclude that auditor independence in audits has a significant positive effect on audit
quality and audit credibility. The results of this study are in line with the results of
research by Le et al., (2021) on managers of 73 KAPs registered in the Capital
Markets Accountant Forum (FCMA); Sarhan et al., (2019) who conducted a survey of
partners; who conducted research on senior auditors, supervisors, managers, and
partners at KAPs registered with the FCMA. The results of this study conclude that
independence has a positive effect on audit quality. Thus research is consistently in
line with. Liu, (2017), Mao et al., (2020) Singh et al., (2019), Putri et al., (2021), Le et
al., (2021), Sarhan et al., (2019) which found auditor independence has a positive
influence on audit quality.
Effect of Audit Quality on Institutional Reputation
The estimation results show that audit quality has a positive and significant effect on
the institution's reputation. In general, it is explained that any increase in audit
quality will significantly improve the reputation of the institution, as seen from the t
count which is greater than the t-table. In line with this theoretically Hou et al.,
(2020), reputation is an auditor's perception that is formed from quality audits in the
past, namely those presented in accordance with professional standards in order to
protect the interests of clients and the public. According to Asante-Appiah, (2020)
auditing is seen as an industry that emphasizes a belief system. Therefore, investors
rely on the reputation of the auditor in assessing/evaluating the credibility of the
entity's financial statements.
Based on the results of the responses to questions from the questionnaire distributed
regarding the complexity of the task, as many as 21 people responded to the
questionnaire with high task complexity and 36 people (34.9 percent) responded to
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the high reputation of the institution. Meanwhile, 28 people (25.2 percent) answered
the questionnaire in the category of high institution reputation with 12 respondents
answering low task complexity. In general, it explains that there is a correlation
between audit complexity and the reputation of the institution, this explains that the
majority of respondents with audit complexity have a high reputation of the
institution. Theoretically explained that this reputation is built over time through the
provision of quality audits. So that a quality audit will have a positive impact on audit
institutions. The results of empirical research conducted by Suwarno Endro et al.,
(2018) concluded that audit quality and credibility significantly have a positive
influence on the reputation of the institution. Like the private sector, the reputation
of a public sector audit institution is also highly dependent on the quality of the audit
produced by Blaufus et al., (2021).
Effect of Audit Task Complexity on Audit Quality
The estimation results show that audit task complexity has a positive and
insignificant effect on audit quality. This is evidenced by the value of t-table which is
smaller than t-count, thus the complexity of the audit task has no effect on audit
quality. This study rejects the hypothesis in which the results of this study have no
significant and positive effect. This is in contrast to various studies which The
complexity of audit assignments can negatively affect professional judgment on audit
results, especially since many audit assignments are very complex in nature. Butar &
Lily (2018).
In line with the results of the descriptive analysis and cross tabulations, it is shown
that in general, more than 62.1 percent of respondents explained that audit
complexity in the high category has high audit quality. In line with the descriptive
results indicate that the average dimensions in these variables have an average value
of around 4, this illustrates that the respondents' responses to the questionnaire
questions are categorized as good. The results of Putri et al., (2021) prove that audit
quality is influenced by audit complexity. Regarding audit complexity, this is
regulated by Qodri et al., (2019) in the AU-C audit planning standard Section 300
Paragraph 01 which states that in audit planning, the audit team needs to consider
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the complexity of the audit entity. This result can be explained because the audit
quality of institutions differs according to their workload on the auditors. Thus, in
order to maintain the quality of the audit, in preparing the audit strategy, the audit
team needs to consider the use of experts to handle matters of a nature.
Effect of Audit Complexity on Institutional Reputation
Results of this study found that audit complexity has a positive effect on the
reputation of the institution, which means that every increase in audit complexity
will increase the reputation of the institution. The results of t-statistics explain that
complexity has a significant effect on audit quality. In line with the results of the
descriptive analysis and cross tabulation, it is shown that in general, more than 62.1
percent of respondents explained that audit complexity in the high category has a
high institutional reputation. This condition is explained by showing that the average
dimensions in the audit complexity and reputation variables have an average value of
around 4, this illustrates that the respondents' responses to the questionnaire
questions are categorized as good which describes the complexity of the audit and
the reputation of the institution has a relatively high rating.
In general, this study rejects the hypothesis where complexity has a negative and
significant effect which is in line with the research of Hou et al., (2020). This
condition is explained by Asante-Appiah, (2020) auditing is seen as an industry that
emphasizes the belief system. Therefore, investors rely on the reputation of the
auditor in assessing/evaluating the credibility of the entity's financial statements.
If the entity's financial statements are complex and have a high burden, it will have a
negative impact on the audit reputation which is the result of research by Endro et
al., (2018), the reputation of the institution over time through the provision of quality
audits. So that a quality audit will have a positive impact on audit institutions. The
results of empirical research conducted by Suwarno Endro et al., (2018) concluded
that audit quality and credibility significantly have a positive influence on the
reputation of the institution. Like the private sector, the reputation of a public sector
audit institution is also very dependent on the quality of the audit produced by
Blaufus et al., (2021)
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Effect of Audit Quality on Institutional Reputation

The estimation results show that audit quality has a positive effect on the reputation
of the institution where every increase in audit quality will significantly increase the
reputation of the institution. This result is in line with DeFond & Zhang, (2014),
auditors with a high reputation will try to maintain their audit quality because they
do not want to risk their reputation. The auditor's reputation for audit quality is
measured based on the market perception of the competence of the auditor and the
independence of the client.
Based on the tabular analysis, which summarized the questions from the
questionnaires distributed regarding audit quality, 24 people (23.3 percent)
responded to the questionnaire with high audit quality and 33 people (32 percent)
responded to the high reputation of the institution. Meanwhile, 33 people (32.0
percent) answered the questionnaire in the category of high institution reputation.
This is in line with theoretically showing that the relationship between audit quality
and the reputation of the institution is positive, where every increase in audit quality
will increase the reputation of the institution, this is in accordance with the
tabulation analysis showing that the majority of respondents stated that high audit
quality generally has a high reputation of the institution.
According to Singh et al., (2019), auditor reputation is influenced by perceived
independence and competence and will increase along with increasing quality of
audit results, namely credible financial information. Research by Hou et al., (2020)
proves that companies that use auditors with good abilities will be more valued by
the market because auditor reputation is important for the market. It is concluded
that these results are in line with DeFond & Zhang, (2014), Singh et al., (2019), Hou et
al., (2020), in which audit quality positively affects the reputation of the institution.
Indirect Mediation Effect Analysis Analysis
Audit Complexity mediated by Audit Quality on Institutional Reputation
In this study, the mediating role of audit quality on audit complexity and institutional
reputation has a t-value of 10,213, which is above the required t-value of 1.645 so
that H6 is accepted which means that the complexity of the audit is mediated by the
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quality of the audit on the reputation of the institution. The results of this study
indicate that the role of the mediation has a relatively high value and the effect is
quite calculated, it is also supported by the results of the probability test that the
variables have a (one-way) and significant relationship on the standard of testing.
Auditor Independence is mediated by Audit Quality on Institutional
Reputation.
In this study, the mediating role of audit quality on audit independence and
institutional reputation has a t-value of 3.00, which is above the required t-value of
1.645 so that H7is accepted which means that Audit Quality mediates Auditor
Independence towards Institutional Reputation. The results of this study indicate a
relatively low value, it can be interpreted that the influence of audit quality in
mediating auditor independence on the reputation of the institution is small, these
findings can be a new benchmark that actually audit quality is not necessarily judged
by how much independence the auditor is in terms of reporting that is be honest with
the reputation of the institution because it is precisely the complexity of the audit
that has a greater influence value. The results of this study are generally contrary to
the study conducted by Ramesh & Ramanathan (2020) using path analysis found that
countries such as India need strict regulatory and regulatory adjustments. to ensure
that the audit profession always has a good impact in this case improving the quality
of auditors is determined by factors such as auditor independence, auditor size, and
auditor reputation.
However, this research is supported by a study conducted by Mao et al., (2020)
whose research focus is on examining the use of auditor participation in auditing, this
shows that there is doubt in the auditor's independence assessment of audit quality
which in general will have an impact on the reputation of the auditor himself.
Conclusions
Based on the results of the hypothesis analysis test in the previous chapter, there are
several things that can be concluded from this study, namely:

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1. Audit independence has a positive and significant effect on audit quality. This
explains that the increasing independence of auditors will improve audit
quality.
2. Audit independence has a positive and significant effect on the reputation of
the institution. This explains that the increasing independence of auditors will
increase the reputation of the institution.
3. Audit complexity has a positive and significant effect on audit quality, thus this
condition means that every increase in audit complexity will increase audit
quality.
The complexity of the audit has a positive and significant effect on the reputation of
the institution, thus this condition means that every increase in the complexity of the
audit will increase the reputation of the institution. Audit quality has a positive and
significant effect on the reputation of the institution.
This condition means that every increase in audit quality will increase the reputation
of the institution The results show that the audit complexity variable rejects the
hypothesis, thus it is necessary to consider for further studies why audit complexity
is proven to increase audit quality and not vice versa. As for the variables of
independence and audit quality, it is proven to have a positive effect on the
reputation of the institution, thus recommendations to the agency to improve the
reputation of the institution in terms of independence and audit quality.
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