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>

A Historical Assessment of a Key Auditor Independence Policy: Auditing Your Own Work

2020 ◽  
Vol 47 (2) ◽  
pp. 11-20
Author(s):  
John D. Keyser
Keyword(s):  
Financial Statements ◽  
Auditor Independence ◽  
Securities And Exchange Commission ◽  
Financial Information ◽  
Financial Statement ◽  
Accounting Profession ◽  
The Subject

ABSTRACT In 1973, the AAA's Committee on Basic Auditing Concepts distinguished the respective roles of management and auditors (AAA 1973). Management is responsible to record, summarize, and communicate financial information to financial statement users. Auditors are responsible to communicate to users an opinion regarding the reliability of the financial information provided by management. The view of the Securities and Exchange Commission (SEC) regarding bookkeeping services, held since June 1940, is consistent with this division of responsibility. In contrast, the accounting profession took the position in 1949 that auditors can objectively audit financial statements with which they assisted in the preparation, and continues to hold that position to the present day. The evolution of these divergent positions regarding the respective roles of management and auditors is the subject of this paper.

scholarly journals The Impact Of Non-Audit Fees Disclosures On Company Value Following The Enron Collapse

2011 ◽  
Vol 1 (6) ◽  
Author(s):  
Marcelo Eduardo ◽  
Tao Zhang
Keyword(s):  
Firm Value ◽  
Abnormal Returns ◽  
Financial Statements ◽  
Audit Fees ◽  
Auditor Independence ◽  
Financial Statement ◽  
Font Size ◽  
Publicly Traded ◽  
The Impact ◽  
Non Audit Services

<p class="MsoBodyTextIndent2" style="text-align: justify; text-indent: 0in; margin: 0in 0.5in 0pt;"><span style="font-style: normal; font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">Investor confidence regarding the reliability of financial statements is absolutely critical for publicly traded companies. The bankruptcy of Enron has brought to the forefront the issue of auditor independence and financial statement reliability. As a response to the criticism that the growth in consulting services by CPA firms was leading to a conflict of interest and significantly hindering auditor independence, the SEC approved new auditor independence regulations that required publicly traded firms to disclose the level of fees that were paid to their external auditor for non-audit services.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></p><p class="MsoBodyTextIndent2" style="text-align: justify; text-indent: 0in; margin: 0in 0.5in 0pt;"><span style="font-style: normal; font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">&nbsp;</span></span></p><p class="MsoBodyTextIndent" style="text-align: justify; line-height: normal; text-indent: 0in; margin: 0in 0.5in 0pt;"><span style="font-size: 10pt; mso-bidi-font-style: italic; mso-bidi-font-size: 12.0pt;"><span style="font-family: Times New Roman;">This paper investigates the impact that the Enron collapse has had on investor perceptions about auditor independence and financial statement reliability. Using data from proxy statements concerning non-audit fees paid to external auditors, we find evidence that auditor independence and therefore financial statement reliability are compromised by the provision of these non-audit services. The results indicate that in the wake of the Enron revelations, investors perceive financial statements as being less reliable and thus require an additional risk premium, which translates into lower stock prices and a loss of firm value. We also find that there is negative relationship between the extent to which firms use non-audit services and the negative abnormal returns they suffered during the Enron collapse.</span></span><span style="font-size: 10pt; mso-bidi-font-size: 12.0pt;"></span></p>

Factors Associated with the Early Adoption of the SEC's Revised Auditor Fee Disclosure Rules

2006 ◽  
Vol 25 (2) ◽  
pp. 41-51 ◽  
Author(s):  
Sharad Asthana ◽  
Jayanthi Krishnan
Keyword(s):  
Audit Fees ◽  
Auditor Independence ◽  
Securities And Exchange Commission ◽  
Factors Associated ◽  
Disclosure Requirements ◽  
Early Adoption ◽  
Disclosure Rules ◽  
Definition Of ◽  
Auditor Fees ◽  
Considerable Concern

Corporate disclosures of auditor fees (beginning in February 2001) caused considerable concern among regulators and investors about auditor independence because they revealed that nonaudit fees were a substantial proportion of total auditor fees. However, in 2003 the Securities and Exchange Commission (SEC) introduced revised disclosure requirements, specifying a broader definition of audit fees, and additional fee categories (SEC 2003). About 31 percent of our sample firms adopted the new rules in advance of the required date. We investigate the pattern of early adoption of the new fee disclosure rules by companies. Our results indicate that companies with greater nonaudit fee ratios during the prior year, companies that could show a greater decline in nonaudit fee ratios due to reclassification under SEC (2003), and companies that had greater audit-related fees after the reclassification were likely to adopt the new rules early. We conjecture that companies that had the most to gain from reclassifying fees—possibly by reducing negative investor perceptions about nonaudit services—adopted the new rules earlier than required.

scholarly journals The Relationship between Non-audit Services and Auditor Independence: Evidence from Chinese Listed Companies

2021 ◽  
Vol 4 (1) ◽  
Author(s):  
Xiaobo Hao
Keyword(s):  
Rapid Development ◽  
Binary Logistic Regression ◽  
Listed Companies ◽  
Auditor Independence ◽  
Binary Logistic Regression Model ◽  
Western Countries ◽  
Chinese Listed Companies ◽  
Independent Variable ◽  
The Relationship ◽  
Non Audit Services

The rapid development of non-audit services (NAS) has jeopardized the independence of auditors, which has led many Western countries to enact regulations that restrict the provision of NAS. While in China, NAS have just emerged, and its development in China is far less mature than in Western countries. The purpose of this paper is to explore whether NAS in China have damaged auditor independence and whether Chinese regulators need to emulate Western countries and strongly limit the provision of NAS. In order to achieve this objective, 213 Chinese listed companies are selected in this study. The audit opinions issued by the auditors are used as substitute variables for auditor independence (dependent variables), and the ratio of non-audit service fees to the total of audit service fees and non-audit service fees as a substitute variable for the provision of NAS (independent variable), and meanwhile some suitable control variables are also selected. Analyse these data by building a binary logistic regression model. The results show that there is no evidence in China that NAS can undermine auditor independence and there is no need for China to enact regulations to prohibit the provision of NAS.

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