Research Journal of Finance and Accounting www.iiste.org ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online) Vol.11, No.4, 2020 42 The Effect of Lowballing on Auditor Independence and Audit Opinion (Case Study at the Public Accounting Office for the Special Capital Region of Jakarta) Cris Kuntadi Postgraduate Masters Program in Accounting, Mercubuana University Abstract This study aims to examine the effect of lowballing on auditor independence and audit opinion. This study uses a sample of 200 respondents who work as auditors in the Public Accountant Offices in the DKI Jakarta areas which are listed in the 2017 Public Accountants Office Directory published by the Indonesian Institute of Certified Public Accountants (IAPI). This study uses primary data with a questionnaire. Auditors participating in this study include junior auditors, senior auditors, managers and partners who carry out work in the field of auditing. The analytical method used to test hypotheses is Simple Linear Regression. The final results of this study are that Lowballing has a significant effect on Auditor Independence and Lowballing has a significant effect on Audit Opinion. Keywords: lowballing, auditor independence, Audit Opinion DOI: 10.7176/RJFA/11-4-05 Publication date: February 29 th 2020 A. INTRODUCTION Opinion aims to provide conclusions and assessments of the quality of the audited company's financial statements. Giving an audit opinion in the audit report is the final step of the entire series of audit processes. Accordingly, the opinion expressed by the auditor is the result of professional analysis and consideration in accordance with his work standards. An audit report is a form of formal communication used by the auditor to convey matters of concern during the audit process to all interested parties. The audit opinion is stated by the auditor as the auditor's conclusion on the reasonableness of the contents of the financial statements in accordance with the applicable principles and regulations. Thus the audit opinion as a source of information that can be used as a measure of the quality and fairness of a company's financial statements as additional information in the decision making process. The company involves KAP to conduct audits of financial statements that aims to provide trust to all users of financial statements that the information contained in the company's financial statements is true, accurate, reliable and free from misleading things. Financial statements are the main media for communicating financial information to parties outside the entity. (Sumarwoto, 2007). The existence of information asymmetry and potential conflicts of interest, so that an audit of financial statements by third parties is expected to reduce the acquisition of information that is not balanced by conducting an audit of financial statements by an independent auditor (Varadita, 2010). Financial statements must be viewed as joint reports from audit firms (KAP) and company management. From the audit aspect, the quality of financial statements refers to audit quality. One of the audit quality can be seen through auditor independence (Antle and Nalebuff, 1991 in Johnson, 2002). Based on PSA No. 04 (SA 220), the auditor must be independent, it means that he is not easily influenced, because the auditor carries out his work in the public interest (Siregar et. Al., 2011). Therefore, this attitude of independence absolutely must exist in the auditor when he conducts an audit. (Wijayani and Indira, 2011). The Government of Indonesia, through Minister of Finance Regulation 17 / KMK.01 / 2008, requires companies to replace KAPs that have received five consecutive year audit assignments (Ni Kadek, 2010) with the aim of improving the oversight structure of KAP (Blouin et al., 2007 and Williams, 1986). In the process of auditing the company's financial statements requires an external auditor or public accountant in auditing the company's financial statements. Financial reports provide a variety of information needed as a medium for decision making by both internal and external parties of the company. According to the FASB, the two most important characteristics that must be present in a financial statement are relevance and reliable. Both of these characteristics are very difficult to measure, so that information users need the services of a third party, namely an independent auditor to provide assurance that the financial statements are relevant and reliable, so as to increase the confidence of all parties interested in the company (Singgih and Bawono, 2010) Lowballing has the effect of increasing revenue by the KAP in the next engagement period by the client. KAP in the future certainly has a close relationship with KAP tenure. The long tenure condition has a commitment escalation relationship associated with lowballing actions to generate other income in the future (Moore, Tetlock, Tanlu & Bazerman, 2006). The longer tenure that is owned by an external auditor, means increasing auditor competence because the auditor knows more about the client's business, so the audit process is more efficient. On the other hand audit tenure might damage auditor independence as a long period of fostering closeness between management and auditor (Junaidi, Hartono, suwardi and Muharjo, 2013). Lowballing research on independence