The Effect of Accounting Uncertainty and Auditor Reputation on Auditor Independence

2000 ◽  
Author(s):  
Brian W. Mayhew ◽  
Jeffrey W. W. Schatzberg ◽  
Galen R. Sevcik
Keyword(s):  
Auditor Independence ◽  
Auditor Reputation

scholarly journals Auditor Independence in a Private Firm and Low Litigation Risk Setting

2010 ◽  
Vol 85 (2) ◽  
pp. 573-605 ◽  
Author(s):  
Ole-Kristian Hope ◽  
John Christian Langli
Keyword(s):  
Auditor Independence ◽  
Private Firm ◽  
Sensitivity Analyses ◽  
Litigation Risk ◽  
Publicly Traded ◽  
Large Sample ◽  
Empirical Results ◽  
Reputation Risk ◽  
Publicly Traded Firms ◽  
Auditor Reputation

ABSTRACT: We examine the issue of auditor independence in a unique setting. Specifically, we test for auditor independence impairment among (1) private client firms, for which the risk of auditor reputation loss is lower than for publicly traded firms, and (2) in a low litigation environment (i.e., Norway) that further reduces the expected costs to the auditor associated with independence impairment. We have thus chosen a setting that gives independence impairment its best chance of being detected if it exists. Using a large sample of private Norwegian firms, we analyze whether auditors who receive higher fees are less likely to issue modified opinions. Despite the low litigation risk and the reduced reputation risk, our empirical results provide no evidence that auditors compromise their independence through fee dependence. These results are robust to controlling for the expected portion of fees, to different sample specifications, to the use of both levels and changes specifications, and to a number of sensitivity analyses.

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