The Effect of Audit Quality on Accuracy of Stock Price Prediction through Earnings Quality, Evidence from Indonesia

This article discusses the results of the study, which consists of three research models. The first research model examines the effect of audit quality on earnings quality. The second research model examines the effect of earnings quality and audit quality on the accuracy of stock price predictions. The third research model, examines the indirect effect of audit quality on the accuracy of stock price predictions, through earnings quality. In this study, the accuracy of stock price prediction is the dependent variable. Earnings quality as a mediating variable. Audit quality as an independent variable, using three measurements, namely the number of auditors, number of clients, and audit fees. Sample research consists of 54 issuers listed on the Indonesia Stock Exchange, during 2013-2016. The sample is selected using the purposive sampling method. The analytical method uses the ordinary least square estimation method, for models that test direct influence. For testing indirect effects, using the two least square methods. The results in the first research model prove that audit quality has a significant and positive effect on earnings quality. The results of the second research model, proving that earnings quality and audit quality have a significant influence on the accuracy of stock price predictions. The results of the third research model prove that earnings quality mediates significantly the influence of audit quality on the accuracy of stock price predictions. Keywords: audit quality, audit fee, earnings quality, stock price prediction