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Auditor independence: a review of literature

Article  in  International Journal of Economics and Accounting · January 2014

DOI: 10.1504/IJEA.2014.060916

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62 Int. J. Economics and Accounting, Vol. 5, No. 1, 2014

Auditor independence: a review of literature

Emmanuel Austin and

Siriyama Kanthi Herath*
School of Business Administration, Clark Atlanta University,
223 James P. Brawley Drive at Fair Street,
Atlanta, Georgia 30314, USA
E-mail: e85austin@gmail.com
E-mail: dinushka_h@yahoo.com
*Corresponding author

Abstract: Independence is one of the most important attributes of the

accounting profession. The auditor independence is measured by how honest an
auditor is in reporting the material misstatements found in the financial
statements by managers. The auditor maintains his/her independence by not
having any conflicts of interest with the client (managers). The auditor is
encouraged to appear independent in the sight of investors, but only to the
extent that the audit fees cover the cost of the actual audit. This research is
expected to serve as a guide in understanding the importance of auditor
independence and the challenges auditors face. The major purpose of this
research is to survey the auditor independence related research literature
published during the period from 1992 to 2010. This survey suggests that a
wide range of topic areas has been discussed and this learning can be
incorporated in revising auditor independence related curricula.

Keywords: auditor independence; conflicts of interest; literature.

Reference to this paper should be made as follows: Austin, E. and Herath, S.K.
(2014) ‘Auditor independence: a review of literature’, Int. J. Economics and
Accounting, Vol. 5, No. 1, pp.62–74.
Biographical notes: Emmanuel Austin is a graduate student in the Master of
Arts in Accounting Program at the Clark Atlanta University in Atlanta,
Georgia. He began his studies in Orlando, Florida at the University of Central
Florida where he received his Bachelor’s degree in Accounting. He has been on
the dean’s list several times for his excellent academic performance at the
university. He is a member of both the Epsilon Gamma Chapter of Beta Alpha
Psi and the National Association of Black Accountants.
Siriyama Kanthi Herath is an Associate Professor in Accounting at the Clark
Atlanta University, USA. She has a PhD in Accounting and a MCom (Hons)
(ACCY) from the University of Wollongong, and an MBA and a BCom (Hons)
from the University of Colombo, Sri Lanka. She has published about 40 papers
in refereed journals. She is a member of the editorial boards of several
academic journals.

Copyright © 2014 Inderscience Enterprises Ltd.

 Auditor independence 63

1 Introduction

Independence is one of the most important attributes of the accounting profession.

Investors rely on information from management regarding the financial position of the
company. Managers have an obligation to uphold the continuity of the company’s profits
and growth. Managers thus, have their own goals and interest in mind apart from the
investors – that is to make the company appear to be in good standing at all times. The
investors are interested in knowing the correct position of the company, so they can
decide whether or not they will continue to invest in the corporation. Therefore, an
intermediary is involved (the auditor) to protect the investors from the self-interests of
managers.
The investors’ confidence in the auditor depends on the auditor’s credibility on how
well the intermediary has been correctly verifying managers’ assertions of the financial
statements. As a result, auditors have to maintain and appear to maintain their
independence at all times. This becomes difficult, because managers are responsible for
hiring and firing the auditor under their own authority. This allows the auditor to be
influenced because of conflict of interest, and perhaps lose his/her independence.
Why does an auditor lose independence? Several factors must be considered in an
auditor’s loss of independence, and depending on the circumstance and individual,
independence can be impaired. Researchers have searched for an explanation as to why
an auditor might lose his/her independence. The purpose of the current research is to
survey the auditor independence-related research published in the period of 1992–2010.
This time period was chosen because of the recent scandals that emerged which forced
the economy into a recession. In the aftermath of a downward economy, the public’s
concern for auditor independence became heightened as companies wanted to ensure a
company’s adherence to professional accounting standards and principles. Through the
examination of the published research and studies, we will explore the variables and a
range of factors which contribute to the loss of auditor independence. The end result will
lead to a more in depth clarity as to what causes an auditor to lose his/her independence.
The paper is organised as follows: In the next section, we will survey literature and
compare and contrast the published research on auditor independence. The survey is
followed by an evaluation of the researchers’ choices of subject matter, research methods,
and style of presenting data and interpretations. The paper concludes with a summary of
research on auditor independence, an overview of variables which contributes to loss of
auditor independence, and recommendations on how researchers should conduct future
auditor independence-related research.

2 A survey of published research

In conducting this research we use Ferreira and Merchant (1992) article, ‘Field research
in management accounting and control: a review and evaluation’ as the foundation as
their study followed a very clear way of reviewing published research. Our survey of the
auditor research on auditor independence is based on a review of three accounting
journals which are listed in Table 1. We selected 16 studies for our survey and Table 2
illustrates the chronological citations of these studies published since 1992. These listings
serve the purpose we previously mentioned to examine auditor independence-related
64 E. Austin and S.K. Herath

research, to examine problems in maintaining auditor independence and explain the

reasons for the loss of auditor independence.

Table 1 Primary sources surveyed for the period 1992–2010

Research journals:
Accounting, Auditing & Accountability Journal
The Accounting Review
Review of Accounting & Finance

2.1 Characteristics of the published research

An important feature of the published auditor independence research in the period
1992–2010 is its diversity. The characteristics of the published research had many
similarities and differences. In this section, following Ferreira and Merchant (1992) who
conducted an extensive study of field research on management accounting and control,
we also discuss the diversity of auditor independence research studies based on their
motivations, research designs and publication formats.

Table 2 Published research in auditor independence – 1992–2010

Study Topic Research sites

Hope and Langli (2010)
Mitra et al. (2009)
Hudaib and Haniffa (2009)
Gaynor et al. (2006)
Menon and Williams (2004)
Mayhew and Pike (2004)
Sucher and
Kosmala-MacLullich
(2004)
Chung and Kallapur (2003)
Auditor independence in a
private firm and low litigation
risk setting
The association between audit
fees and reported earnings
quality in pre- and
post-Sarbanes-Oxley regimes
Exploring auditor
independence: an interpretive
approach
The effects of joint provision
and disclosure of non-audit
services
Former audit partners and
abnormal accruals
Investor selection of auditors
enhance auditor independence
A construction of auditor
independence in the Czech
Republic: local insights
Client importance, non-audit
services, and abnormal
accruals
Large sample of private
Norwegian firm
Big 4 (5) client companies
over a period from 2000 to
2005
Two audit firms in Saudi
Arabia
One hundred experienced
corporate directors
SEC filings of directors and
offices of publicly traded
companies
Earlier independence research
Interviews with Czech
auditors, regulators,
academics, and users of the
financial statements
Sample of 1,871 clients of
Big 5 audit firms
 Auditor independence 65

Table 2 Published research in auditor independence – 1992–2010 (continued)

Study Topic Research sites

Ashbaugh et al. (2003)
Ashbaugh et al. (2003)
Lee and Gu (1998)
Krishnan and Krishnan
(1997)
Reiter (1997)
Jeter and Shaw (1995)
Kanodia and Mukherji
(1994)
Bartlett (1993)
Miller (1992)
Non-audit services
compromise auditor
independence
Non-audit services
compromise auditor
independence
Low balling, legal liability and
auditor independence
Litigation risk and auditor
resignations
The ethics of care and new
paradigms for accounting
practice
Solicitation and auditor
reporting decisions
Audit pricing, low-balling and
auditor turnover: a dynamic
analysis
A scale of perceived
independence: new evidence
on an old concept
Considering the individual
auditor when discussing
auditor independence
Fee data from 4,959 firms
from US registrant’s 2000
proxy statements
Fee data from 4,959 firms
from US registrant’s 2000
proxy statements
Multiple agents
Companies that dismiss their
auditors
Interviews with US accounting
professionals
Various samples of clients
Various samples of clients
Prior research
Prior research

2.2 Motivations

We attempted to recognise the motivations for the studies listed in Table 2. Many authors
focused their writings clearly, highlighting the importance of auditor independence
building a strong foundation for their intended contribution to the ongoing development
of the field. Mere description, theory building, and hypothesis testing are the main groups
in which these motivations can be classified.
One motivation of the researchers examined was to give a description of auditor’s
independence. For example, Hudaib and Haniffa (2009) described the construction of the
meanings of auditor independence in an oil-rich autocratic state with an ideology
straddling liberal market capitalism and Shari’ah Islamic teachings in their
article ‘Exploring auditor independence: an interpretive approach’. Another example
is the exploration of the wider view of auditor independence by Sucher and
Kosmala-MacLullich (2004) in ‘A construction of auditor independence in Czech
Republic: local insights’. They explained how further understanding of the social,
economic and cultural context in auditor independence is being realised. Their
comparisons on the IFAC Code, aspects on independence, and local regulation concluded
that there may be a limitation as to how auditor independence is realised in a local
66 E. Austin and S.K. Herath

context. Furthermore, this research indicated that there were many more issues which
could contribute in resolving the issues on auditor independence in transitional
economies such as the Czech Republic.
In going beyond the description and building a new theory, Lee and Gu (1998)
constructed a multi-agent moral hazard model to evaluate the relationship between firm
owner, manager, and the auditor. As a result, Lee and Gu (1998) created ‘the low balling
schemed’ model for external auditing services. With such a new theory and model, it is
concluded that, “the auditor in effect puts up a bail bond with the owner, to be forfeited if
wrong doing is discovered” (Lee and Gu, 1998). On the same subject of low-balling, in a
theory building article, ‘Auditing pricing, low-balling and auditor turnover: a dynamic
analysis’, Kanodia and Mukherji (1994) constructed and analysed an economic model of
audit pricing. Using the static model and the multi-period model, they were able to show
how equilibrium audit prices would sustain rents and low-balling even when clients have
most or all of the bargaining power and are free to change auditors every period (Kanodia
and Mukherji, 1994).
In examining the hypothesis testing related articles, the majority of these were
derived from a very diverse group. The hypothesis scope ranged from categories such as:
audit fees, low-balling, audit firms hiring clients, non-audit services, and litigation and
risks. Strong expectations, assumptions, and an enthusiasm to explore alternative theories
in case the hypothesis testing failed, seemed to be the consensus in the review of the
literature. Description, theory building, and theory testing of new and existing models led
researchers to explore pre-existing theories, at times revealing a lack of support for the
researchers’ hypotheses. This then led the researchers to examine the underlying cause
for the unsupported hypotheses and whether or not there were missing parameters. For
example in an Accounting Review Article, entitled ‘Client importance, nonaudit services,
and abnormal accrual’, the authors used a sample of ‘1,871 clients of Big 5 audit firms in
the investigation of significance and association of client importance (US Revenues and
audit practice office revenues) in relation to the Jones-model abnormal accruals (Chung
and Kallapur’s, 2003). In the testing of Chung and Kallapur’s (2003) hypothesis, their
theory development also suggested that “auditor incentives to compromise independence
should increase with the extent of client opportunities and incentives to manage earnings
and decrease with the strength of corporate governance and auditor expertise” [Chung
and Kallapur, (2003), p.931]. Their research concluded with no ‘statistically significant
association between abnormal accruals and client importance’ [Chung and Kallapur,
(2003), p.931].
In the study, ‘The Effects of Joint Provision and Disclosure of Nonaudit Services on
Audit Committee Members’ Decisions and Investors’ Preferences’, Gaynor et al. (2006)
went to the field, using a site and a source of real data. They selected “one hundred
experienced corporate directors, responding as audit committee members or investors,
participated in an experiment in which we manipulated the effect of the auditors
provision of nonaudit services on audit quality and the fee disclosure requirement”
[Gaynor et al., (2006), p.873]. Gaynor et al. (2006), designed a detailed experiment in the
effort to provide empirical data on three broad questions relating to the “consequences of
these regulations on audit committees’ decisions: (1) First, do audit committees consider
the nonaudit service effects on audit quality in deciding whether to approve the purchase
of nonaudit services from the auditor; (2) Second, to what extent do the mandated
disclosures affect audit committees’ pre-approved decisions?; (3) Finally, to what extent
 Auditor independence 67

are audit committees’ decisions regarding the auditors’ joint service provision consistent
with investors’ preferences?” (Gaynor et al., 2006). With this purpose in mind, Gaynor
et al. (2006) conducted detailed interviews in which they divided up the participants by
addressing the three questions to different groups, where the participants assumed roles
of audit committee members and investors. Gaynor et al. (2006) did not directly
manipulate the “perceived effect of the nonaudit service on audit quality (variable of
interest)”, but they “instructed participants that the risk management (human resource
management) nonaudit services will improve (have no effect on) audit quality”.
Specifically, the participants in their experiment included 100 corporate directors who at
some point during 2003 attended a KPMG Audit Committee Institute Roundtable. Eighty
one of the participants were given the first two questions, and assumed the role of audit
committee members. The remaining 19 participants assumed the role of investors and
“asked to indicate which firm they would prefer provide the risk management services”
(Gaynor et al., 2006). As a result, they found that audit committee members were more
likely to suggest joint provision if audit quality improves and is consistent with investor
preferences (Gaynor et al., 2006).
Our analysis of the studies selected shows that the motivation of these published
research projects is dependent on the consistent development of the auditor
independence. The researchers, for the most part, continued on with the study of auditor
independence, which is consistently being developed by the implementation of new
accounting standards. Their observations and descriptions of some of the contributions
pertaining to auditor independence generated very useful recommendations for future
research. As a result, multiple theories or suppositions have been refined and a new
direction to research has been discovered.
The researchers have exemplified multiple areas of motivation, which include
defining a narrow and clear purpose, providing descriptions, and making statements
about the results of tested hypotheses, models and theories. It is common for most
researchers to have multiple purposes and motivations. A great amount of theoretical
significance was reflected on in the researchers’ observations, enabling the researchers to
build new theories and to attempt to construct new models which would enhance the
literature constructed on auditor independence.
At times the researchers modified their motivation and initial topic area. A prime
example is clearly evident in Kanodia and Mukherji (1994). What started out to be a
strong argument, which focused on their key analysis: “(1) clients have bargaining power
that is superior to auditor, at least in setting audit prices, (2) audit contracts are signed
only one period at a time, (3) an incumbent auditor acquires private clients specific
information about the recurring cost of auditing that client, and (4) it is costly for a client
to replace an incumbent auditor” is explored through a static model, which ends with less
specific assumptions. For example, Kanodia and Mukherji (1994) stated in the
conclusion, “Our model does not explicitly incorporate reporting and auditor
independence issues, so there are no formal results on whether low-balling per se would
produce client pressure on the quality of audit reports” (Kanodia and Mukherj, 1994).
Further they summarised that, “the results described in this paper are not restricted to
auditing but would apply to any industry” (Kanodia and Mukherj, 1994). Evidently, this
shows a once focused topic, purpose and motivation, becoming less associated with the
initial analysis’s intent and objectives to a more general association.
68 E. Austin and S.K. Herath

3 Research design

The research design of the selected studies have many similarities and differences in
terms of the characteristics of samples, the methods of sample selections, the methods
used in collecting data, and the timeframe in which the research was conducted.

3.1 Sample characteristics

Observing the samples used in the different research examinations, it is noticeable that
the range of samples is wide. The samples range from big audit firms, small audit firms,
clients of big audit firms, clients of small audit firms, and other samples that can be found
in Table 2. Research was also done in countries other than the USA such as the Czech
Republic, Norway, and Saudi Arabia.
Most of the research sample sizes are large enough for the researchers to discover a
relationship. For example, Ashbaugh et al. (2003) collected fee data for 4,959 firms from
registrants’ 2000 proxy statements to disprove the belief that firms purchasing non-audit
services manage earnings to a greater extent than other firms. Ashbaugh et al. (2003)
separated their fee data between Big 5 and non-Big 5 audit firms in order to eliminate any
outliers that will exist in a joint model. A more accurate general consensus was
determined about the behaviour of each individual model by separating the two large
sample sizes.

3.2 Method of sample selection

The researchers chose samples that would represent the best results to their purposes. For
example, as mentioned before samples included countries such as Czech Republic,
Norway, and Saudi Arabia. Research was done in these countries to discover how people
from different cultures perceive auditor independence, and to gain an insight on what
factors play a major role in an auditor’s loss of independence in these societies. In the
article ‘Exploring auditor independence an interpretive approach’, Hudaib and Haniffa
(2009) stated “The purpose of this paper is to explore the construction of the meaning of
auditor independence (AI) in an oil-rich autocratic state with an ideology straddling
liberal market capitalism and Shari’ah (Islamic teachings)”. In this article, Hudaib and
Haniffa (2009) interviewed auditors in two audit firms in Saudi Arabia (an oil-rich
autocratic state with a liberal market capitalism and Islamic teachings). Sucher and
Kosmala-MacLullich (2004) conducted interviews with regulators, auditors, and users of
financial statements in the Czech Republic and Czech media coverage to ascertain the
state of auditor independence in a transitional economy in the Czech Republic and to
understand how culture may affect a particular understanding of auditor’s independence.
As in most of the research articles reviewed, it can be concluded that the samples chosen
in the researchers’ findings were chosen to aid the researcher in drawing a general
conclusion about the topics being analysed.

3.3 Data collection method

Some of the researchers gave a clear and thorough explanation on how the research data
were collected in their examinations. The researchers discussed who was involved in the
 Auditor independence 69

collection of data, which methods were used, and the period of time in which the
collection process took place. For example, in the article ‘A construction of auditor
independence in the Czech Republic: local insights’, the authors give specific details
about how they conducted their research. The authors stated that the interviews were
undertaken in September 2001, with one in April 2002. In relation to this research, the
interviews consisted of a mix of open-ended, unstructured questions and semi-structured
questions. The interviews lasted between 1 hour and 3 hours and were tape-recorded,
where possible. These specific details provided by Sucher and Kosmala-MacLullich
(2004) gave readers an understanding of the efforts put forth in the researchers findings.
Critics will argue that information about the methods authors use to collect data is
necessary to deem their findings credible.
Not all of the studies we examined are worthy of such credibility. Some of the
researchers’ methods for collecting data were ambiguous. While trying to test their theory
(whether investor selection of auditors impacts auditor independence differently than
manager selection of auditors), Mayhew and Pike (2004), explained the experiment’s
design and purpose. However, the authors do not provide the readers with any
information about the participants the experiment was tested on. The ambiguity leaves
the readers sceptical about the results generated by the experiment. In such cases, any
research that provides the additional information with an opposing view from that of the
authors would be deemed more credible.

3.4 Time frame

Most of the research that was done was cross-sectional. For example, in the article ‘Client
importance, nonaudit services, and abnormal accruals’, Chung and Kallapur (2003) used
the studies of DeAngelo’s model in 1981, Becker findings in 1998, and Frankel findings
in 2002 to motivate their choice of auditor independence measures and sample
participants where independence impairment is more likely to occur (Chung and
Kallapur, 2003). Chung and Kallapur (2003) concluded, “Overall, we do not find
evidence consistent with auditor independence impairment as a function of different
client fee ratios, either in the full sample or even in the subsamples in which, the theory
suggests, auditor’s incentives to compromise independence should be greatest”. The
majority of the studies that were researched used several findings from several different
periods to formulate a conclusion.

4 Evaluation

There are currently no standards in evaluating auditor independence research. The

purpose of this paper is not intended to establish specific evaluation standards for
research in auditor independence. We are instead concerned with evaluating how the
research method has been applied to auditor independence related issues. Therefore, we
choose to use the set of standards for evaluating research described by Bruns and Kaplan
(1987). As shown in Table 3, the standards relate to the studies choice of subject matter,
research design, data presentation and interpretation, and practical implications.
70 E. Austin and S.K. Herath

Table 3 Key criteria for evaluating auditor independence research

1 Choice of subject matter
The researcher chose a significant topic, asked good questions and explored original themes.
A good topic was recognised by its significance to the management community and/or its
potential for making significant advances in the conceptual development of a managerially
relevant phenomenon. Originality occurred when the phenomena were previously
undescribed or unexplained.
2 Research design
The choice of site(s) and research methods were appropriate for the topic, especially in light
of previous conceptual and descriptive work on that topic (for example, one may not want to
study general management processes on the shop floor of a factory). Careful site selection,
sequence of inquiry, and choice of questions for interviews and observation were critical to
successful research.
•Site selection. Given limited resources, time and existing theory, only discrete, focused
research sites made sense for in-depth investigation. The selected sites exploited natural
experiments when available (organisations in apparently similar circumstances
following different policies or using different systems); the sites were differentiated
along significant lines so that the structure of the sampling had face validity.
• Data collection. Rich and evocative data were included that described the administrative
dilemmas and the structural and environmental context of the managerial situation.
Anecdotes were a powerful mechanism for communicating the organisational context of
the study.
• Triangulation. All kinds of available data were used to supplement observation,
including interviews, examination of source documents and questionnaires. Particularly
for the study of management processes, unobtrusive observations often yield the most
valuable data.
• Effective interviewing. Everyone involved in the topic was interviewed thoroughly.
3 Data presentation and interpretation
• Face credibility of data. The data had verisimilitude; for example, executives were
quoted in their own terms and not in edited, academic jargon. Informed readers
recognised that the researcher understood the territory being explored and was careful in
interpreting the data and that each site was studied in sufficient depth.
• Making sense of the data. The study was more than just raw description; the researcher
developed or used previously existing concepts to organise the data and made them
accessible and understandable to the reader, who was brought sufficiently close to the
data to be able to imagine alternative diagnoses.
• Data were related to theory. The data presentation was comprehensive; the
knowledgeable reader did not find important dimensions of the problem undescribed.
Good use was made f metaphor. The researcher’s background in the discipline was
applied to the data, and the findings were contrasted with existing theory and concepts.
Thus, the structure of the reported data, and the concepts used to organise the data,
connected easily to the established literature. Clinical research was most powerful when
it showed that conventional models and wisdom did not apply in actual situations; used
in this mode, clinical evidence could disprove hypotheses. Greater skill was required to
use clinical evidence to establish new propositions and theories.
4 Practical implications
The findings from the research study were useful. The implications for practice were clear,
and appropriate qualifications in light of the sample size and types of organisations studied,
were noted. The validity of the description was supported by practitioner/experts who often
made remarks like, “That’s exactly the way it is; it’s nice to have the problem articulated so
clearly”. The findings rang true to an informed reader, though practitioner/experts did not
have to agree with the analysis, interpretation or prescription offered by the researcher.
Source: Based on Burns and Kaplan (1987, pp.5–7)
 Auditor independence 71

4.1 Choice of subject matter

The choice of the subject matter was relatively strong as the auditor independence
research literature is significant in the building of a conceptual framework for auditor
independence. The array of studies focused on a plethora of topics. Many of the
researchers enhanced the continuing discussion, relating to the challenges in maintaining
auditor independence. Literature published as early as 1947, laid the foundation – a
history to be built and the advancement and new understanding on how to maintain
independence in the world of auditing.
The studies mainly focused on the problems in maintaining auditor independence and
the factors that could impair or compromise an auditor’s independence, such as:
low-balling, non-audit services, litigation, and the association of audit fees.

4.2 Research design

The majority of the auditor independence researchers’ designs were straightforward and
easily interpreted based on the diversity of the research published in the existing
literatures. Although there were existing design alternatives, the researchers’ disclosures
on how the project evolved were evident.
Intentional sites were selected for the in depth description of practice, exploration of
theory building, and hypothesis testing. The chosen sites exploited the natural
progression and development in literature and research on auditor independence and the
accounting principles and issues which shape this auditing accounting standard. The
various sites, journals and articles displayed diversity in the effort to capture a wide range
of progression in the literature and the addressing of issues and challenges faced when
maintaining the auditor independence.
Thought provoking, expansive and thorough data were included that provided the
auditors challenges with independence in the context of several circumstances as it relates
to the auditor independence in appearance and fact for investor and creditors. A broad
range of scenarios provided a powerful foundation and key insight into the ongoing
discussions centred on the importance of maintaining auditor independence and the
effects of the auditor independence.
An array of data inclusive of research, model and theory building and testing, further
including interviews, questionnaires, direct observations and the examination of historical
evidence provided the most important information. Particularly for the study of auditor
independence, researchers’ findings offered great supplementation to direct observations.
The researchers showed that those who underwent the interviewing process did so in
a thorough manner.

4.3 Data presentation and interpretation

The researchers effectively communicated the methods and procedures used to conduct
their studies. The researchers clearly defined auditor independence and gave specific
details on how their findings were implemented. Consequently, the reader is able to
confidently trust in the reasoning behind the researchers’ results.
The studies were more than unrefined descriptions because the researchers expanded
and used previously existing theories. The researchers analysed the previous body of
work on auditor independence and explained the strengths and weaknesses of the
72 E. Austin and S.K. Herath

arguments from the previous researches’ conclusion. The reader can understand the
thought process of the researchers’ approach in discovering a new theory about auditor’s
independence.
The researchers had a thorough understanding of the existing findings as it relates to
auditor independence. The researchers challenge the essence of auditor independence by
using former information along with newly insightful concepts relating to auditor
independence. The researchers are knowledgeable and comprehended prior discussions
on the topic, while following the researcher’s methods of exploration.

4.4 Practical implications

The findings from the selected research were constructive and the topics were significant.
The implications behind the methods and models used to conduct research were clearly
stated. For example, in the articles the findings were not accepted entirely, but the results
and analysis of the factors affecting auditor independence related back to the main
purpose of the paper: how to keep auditors independent. These researchers performed the
studies well, writing clearly and convincingly, making apparent some of their potential
practical implications.

5 Conclusions

In these times of worldwide recessions and rebuilding of the economy, auditor

independence will continue to remain at the forefront of importance to the accounting
profession. Auditor independence is crucial to the key information investors and
corporations rely for the sustaining of capital market’s profit and growth. In this research
paper, we surveyed 16 auditor independence-related research articles, which were
published during the time frame of 1992–2010. Selecting this time period proved
beneficial and provided astounding insight into the emerging concerns about auditor
independence, amidst an increase in scandals which ultimately has led to the economy
being forced into a recession.
The research paper started with an abstract, introduction, followed by a survey of
literature and comparison, contrasting the published research on auditor independence.
We then did an evaluation of the researchers’ choices of subject matter, research
methods, and style of presenting data and interpretations. Each researcher had strong
evidence to support their conclusion on why auditors lose independence. In examining
the research and studies, variables ranged from: audit fees, low balling, audit firms hiring
clients, non-audit services, and litigation and risks. However, each of the researcher
findings reflects just one aspect to be considered in the argument concerning auditor
independence. We concluded that the research findings represented one point of view of
auditor independence, but the combination of the findings contribute to the conceptual
framework built around auditor independence. As a result, the studies of the auditor
independence-related research enabled us to support our conclusion that auditor
independence is dependent on more than one variable.
One factor alone is not the reason itself but just part of the reason; therefore, one
factor should not be deemed as the primary cause. We recommend that auditor
independent-related research be centred on all factors such as: audit fees, low balling,
audit firms hiring clients, non-audit services, and litigation and risks.
 Auditor independence 73

We acknowledge that there are some limitations in the current research study. In
particular, there is an obvious sample selection bias as we confined our study to a special
time period and also we selected only 16 published research papers as our sample.
Another clear limitation of the current study is the choice of publication sources; we
limited the sources of publication to three accounting journals.
These limitations can be eliminated by conducting a large-scale longitudinal study of
published research on auditor independence. Also, future studies may be directed towards
understanding diverse effects of maintaining auditor independence on company
performance and investor confidence. Another useful area of study may be an evaluation
of auditor independence in relation to multinational enterprises where regulators and
managers have ongoing conflicts related to transfer pricing issues.
Findings from this survey of auditor independence research literature are impressive.
This survey suggests that a wide range of topic areas has been covered by the various
researchers. This learning can be incorporated in revising curricula related to auditor
independence.

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