Auditor Independence in Appearance: An Examination of Perception Differences between Accountants and Non-Accountants

2011 ◽  
Author(s):  
Hossein Nouri ◽  
Sunita Ahlawat
Keyword(s):  
Auditor Independence ◽  
Independence In Appearance

Tax services, consequence severity, and jurors' assessment of auditor liability

2013 ◽  
Vol 29 (1) ◽  
pp. 50-75 ◽  
Author(s):  
John M. Thornton ◽  
Michael K. Shaub
Keyword(s):  
Audit Quality ◽  
Auditor Independence ◽  
Tax Planning ◽  
Court Case ◽  
Content Type ◽  
Auditor Liability ◽  
Audit Failure ◽  
The Impact ◽  
Independence In Appearance

Purpose – The purpose of this research is to determine whether the type of tax services provided by a public accounting firm to its audit client and the consequence severity of an audit failure impact jurors' assessment of audit quality and auditor liability. Design/methodology/approach – The authors administer a court case to 168 jurors manipulating three levels of tax services provided to an audit client (none, tax preparation, and aggressive tax planning services); two levels of consequence severity of the alleged audit failure, observing the impact on jurors' assessment of audit quality, auditor responsibility for audit failure; and damages awarded the plaintiff. Findings – Consistent with recent US regulations, jurors perceive the quality of the audit to be lower when auditors provide aggressive tax planning services, but not for tax preparation services. Damages are greater when auditors provide aggressive tax planning services across both levels of consequence severity. Research limitations/implications – The results indicate that the type of tax services provided may impact jurors' views of audit quality and damage assessments against auditors. The questionnaire uses previously validated measures, but the results may not be generalizable to jurors in all jurisdictions. Practical implications – Though empirical evidence is mixed at best about the impact of auditors providing non-audit services on auditor independence in fact, auditor independence in appearance, and thus audit quality, such impacts may affect the way jurors perceive the situation. Originality/value – The study directly tests the implications for auditor liability of new restrictions on tax services and more accurately measures the impact of consequence severity, using actual jurors.

Nonaudit Services and Independence in Appearance: Decision Context Matters

2011 ◽  
Vol 23 (2) ◽  
pp. 51-67 ◽  
Author(s):  
Bryan K. Church ◽  
Ping Zhang
Keyword(s):  
Auditor Independence ◽  
Decision Context ◽  
Accounting Scandals ◽  
Asset Value ◽  
Nonaudit Services ◽  
Daunting Challenge ◽  
Independence In Appearance ◽  
Large Decline

ABSTRACT This paper reports the results of two experiments designed to examine users' assessment of the provision of nonaudit services (NAS) on auditor independence. By design, each experiment includes a different decision context. In the first experiment, users witness a large decline in asset value and decide whether to sue the auditor in an effort to recoup losses (as often occurs with accounting scandals). In the second experiment, users assess asset value, which offers a more mundane context. We contend that decision context influences users' motives, such that the auditor's provision of NAS is interpreted opportunistically. Indeed, we find that decision context dramatically affects users' perceptions. Our findings have implications for regulators, who face the daunting challenge of mandating rules/laws to ensure auditor independence. The task becomes more difficult when users' assessment of auditor independence is malleable, varying across decision contexts.

If You Need Love, Get a Puppy: A Case Study on Professional Skepticism and Auditor Independence

2009 ◽  
Vol 24 (2) ◽  
pp. 237-252 ◽  
Author(s):  
Robert L. Braun ◽  
H. Lynn Stallworth
Keyword(s):  
Auditor Independence ◽  
Internal Controls ◽  
Mental Attitude ◽  
Professional Skepticism ◽  
Teaching Case ◽  
Audit Evidence ◽  
Independence In Appearance ◽  
Professional Choices

ABSTRACT: The purpose of this teaching case is to expand students' understanding of the concepts of professional skepticism and independence. The case is based on an actual incident and illustrates the exercise of professional skepticism by a staff auditor who finds himself in the uncomfortable situation of accusing a friend of fraud. The case demonstrates the difficult personal and professional choices that auditors must sometimes make. In analyzing the case, students consider auditor independence rules, as well as the concepts of independence in appearance and independence in mental attitude. Students are asked to identify the types of audit evidence and internal controls needed to detect and prevent the fraud, and to consider the appropriate audit response to an adverse situation.

scholarly journals Assessing The Appearance Of Auditor Independence Using Behavioral Research Methodology

2011 ◽  
Vol 24 (4) ◽  
Author(s):  
Gary Colbert ◽  
Dennis Murray ◽  
Robert Nieschwietz
Keyword(s):  
Research Methodology ◽  
Auditor Independence ◽  
Securities And Exchange Commission ◽  
Behavioral Research ◽  
Financial Statement ◽  
Archival Studies ◽  
Policy Changes ◽  
Mixed Support ◽  
Independence In Appearance ◽  
Non Audit Services

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Recent archival studies have examined the association between auditor independence and non-audit services. The results of these studies<span style="mso-bidi-font-weight: bold;"> suggest that fees for non-audit services are not associated with indicators of auditor independence in fact whereas these fees are associated with financial statement users&rsquo; perceptions of auditor independence (i.e., independence in appearance). The present study attempts to reconcile these conflicting findings by using a behavioral research methodology that provides greater control over the independent variables and measures more directly financial statement users&rsquo; perceptions. Our results indicate that fees for financial information systems development services do not affect perceptions of auditor independence, whereas, fees for tax services adversely affect perceptions of independence. Overall, the results provide mixed support for the recent Securities and Exchange Commission policy changes on auditor independence. </span></span></span></p>

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