Purpose

This study investigates the effect of abnormal audit fee on audit opinion of listed companies in Indonesian Capital Market. Wheather opinion shopping does exist in Indonesia?

Design/methodology/approach

Using a sample of  Indonesia’s non-financial listed companies for the period 2009-2012. Abnormal audit fees is the difference between actual audit fees paid to the auditor and the expected normal level of fees that should have been charged for the audit engagement effort. Regression technique which was used is ordered logit and continued by mfx testing and predicted probabilities.

Findings

The study shows that an increase in abnormal audit fee leads to a higher probability of better audit opinion given by the auditor; and therefore, opinion shopping does exist in Indonesia. Furthermore, this study also found that increasing in abnormal audit fee would increase the probability of the company to obtain unqualified audit opinion. This showed that there were indications of abnormal audit fee influences the audit opinion in the form of opinion shopping that increased auditor dependence on their client and decrease the independence of auditor.

Implication

This research provides advice for regulators to encourage mandatory disclosure on audit fee. Based on available data, it is evident that the company which involved in the practice of opinion shopping, where companies seek to maintain or gain a better opinion. Audit fee which was not disclosed allows companies to take these actions more freely, without any control from stakeholders. Opinion shopping practices are harmful for the capital market condition because it can eliminate the trust of stakeholders on assurance services.