Impact of Risk Material Misstatements Assessment on Indonesia Audit Practices

Abstract

Objective: The purpose of this study is to determine what factors could influence the determination of the auditor's Risk Material Misstatement (RMM) in Indonesia.   Theoretical Framework: Auditors need to perform a variety of tasks to form an overall assurance or attestation opinion. To do so, various personal attributes of the auditor influence the outcome. In the process of applying these personal attributes towards the performance of the task, auditors interact with other auditors and stakeholders of the firm.   Method: Sources of data come from interviews with several auditors in Indonesia and regulators namely IAPI and the Financial Services Authority (OJK).   Results and Discussion: The results showed that the factors affect the level of RMM are due to government regulatory factors, individual factors and cultural factors.   Research Implications: Government regulatory factors that can influence auditors in determining RMM: 1) encourage an increase in personnel capabilities, 2) increase in skill abilities, and 3) self-awareness of the ability to carry out duties and responsibilities. Then the individual factors that can influence the determination of the Auditor's RMM include: 1) understanding of culture and governance, 2) determination of risk, 3) potential and human resources owned by the auditor. On the other hand, cultural factors in the field of auditing that influence auditors are less critical or profound, contributing factors that do not genuinely accept the distribution.   Originality/Value: This paper focuses specifically on the auditor’s cognitive performance – the auditor’s ability to make normatively correct inferences about testing hypotheses in the course of the audit.