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The preparers opine that failure to rotate auditors and the control of auditor appointment and
remuneration by the board is more AI constraining, relative to the opinions of both the auditor and
user regarding these factors. In case of another loss of a Big Four firm caused by professional
misconduct, the effects of a four-to-three scenario would, among other effects, erode investor
confidence to an unprecedented low, one from which it would take years to recover. Conclusion and
suggestions and directions for the future research are described accordingly. We organize our review
around four main threats to auditor independence, namely, (a) client importance, (b) non-audit
services, (c) auditor tenure, and (d) client affiliation with audit firms. For each of the threats, we
discuss findings related to the incentives, perceptions, and behaviors of the auditor and the client, as
well as the effects of each threat on the actual and perceived quality of audits and financial reports.
Financial statement preparers were more concerned than auditors and users that failure to rotate
auditors and the control of auditor appointment and remuneration by the board impairs AI. However
this led to many auditors failing to be completely honest in their work in order o refrain from
aggravating their relationships with the corporations they audited and consulted. GIFs Highlight
your latest work via email or social media with custom GIFs. Auditor’s independence must be about
integrity, objectivity and skepticism (Basu, 2009). Self-review threats also present threats to
independence while advocacy threats may present unbiased opinions on the financial position of the
firm. Besides shareholders, other stakeholders like investors, bankers, bonding agencies and other
creditors depend on audited financial reports to initiate or enhance business with those organisations.
Download Free PDF View PDF See Full PDF Download PDF Loading Preview Sorry, preview is
currently unavailable. Adelopo, I. 2012. Auditor independence: auditing, corporate governance and
market confidence. Lehman (2006, 33) found that the compliance aspect - assurance that auditors
fulfill their fiduciary duty to investors was largely taken for granted. Further, weaken independence
of external auditor is a serious challenge for the government bodies that make tax liability assessment
and regulatory duties on the basis of audited financial reports. In addition, this research adds further
evidence to the value of studying auditing efficiency, the reputation of audit firm, auditing fees, the
size of auditing office, and the proficiency of auditor on the quality of auditing. According to (),
aggressive financing reporting will only occur when multiple governance mechanism fails. This study
using a survey with census method using questionnaires distributed to all auditors in BPK
Perwakilan Provinsi Sulawesi Utara. The studies also contain cases where the non-audit fee was 10
to 12 times higher than the audit fee. However recent times, due to the economic downfall, have
seen the fall of Lehman Brothers and the near fall of AIG. The independence of the auditing body in
the business environment is of paramount significance to the smooth running of financial operations.
This just goes on to show the consequences of collaboration between external auditors and the firms
they audit. You can download the paper by clicking the button above. This paper proposes that
auditor independence as defined by fact and appearances can and should be measured by regulatory
and informed stakeholders in o rder to determine the confidence to be reposed on financial reports
and audit quality. Internal auditors can actually “enhance a corporation’s accounting and internal
control efficiency” (Kim, Nofsinger, Mohr, 2010b). The research method using exploratory method
by conducting a survey on General Inspectorate State Ministries and Non-Ministerial Agencies as the
Situs. Adobe Express Go from Adobe Express creation to Issuu publication. The review also
revealed four threats to auditor independence, which are client importance, non-audit services
(NAS), audit tenure, and client’s affiliation with CPA firms. However, some studies indicated a
positive relationship while others showed contrary due to the type of study design employed, sample
size, data collection instruments. When giving out a reasonable assurance, the auditor gives out a
positive report (means the statement given out would be a positive one as opposed to a normative
statement given out in limited assurance). Interference with Auditor independence or audit quality
can result in failure and adversely affect the parties relying on the fair representation of the financial
statements in conformity with established accounting standards.
Let us write or edit the research paper on your topic. Section 302 makes organisations assume
corporate responsibility for financial reports while auditors confirm truth and accuracy. Gray, I. 2007.
The audit process: principles, practice and cases. Therefore, this study focus was to examine the
factors that determine external auditors’ independence in Kenya. Articles Get discovered by sharing
your best content as bite-sized articles. Secondly, if external auditors are not independent of the
firms they audit and overlook bad accounting practices; there is a relatively high chance that these
corporations will become bankrupt when their “bubbles burst”. The study revealed that there is
independence of internal auditors in those tertiary institutions. In addition, this study also found that
ethics did not moderate the influence of auditor independence on audit quality, ethics did not
moderate the effect of auditor integrity on audit quality and ethics did not m. We organize our
review around four main threats to auditor independence, namely, (a) client importance, (b) non-
audit services, (c) auditor tenure, and (d) client affiliation with audit firms. For each of the threats,
we discuss findings related to the incentives, perceptions, and behaviors of the auditor and the client,
as well as the effects of each threat on the actual and perceived quality of audits and financial
reports. This study examines factors affecting auditor’s independence in Nigeria. See Full PDF
Download PDF See Full PDF Download PDF Related Papers Auditor Independence and Audit
Quality: A Literature Review Richard Francis This article presents a comprehensive review of
academic research pertaining to auditor independence and audit quality. This then led to the
Sarbanes-Oxley Act of 2002 which gave the responsibility of choosing an auditor to an audit
committee rather than the CFO (Locatelli, 2002). Further, weaken independence of external auditor
is a serious challenge for the government bodies that make tax liability assessment and regulatory
duties on the basis of audited financial reports. Hermes.co.uk lauded auditing firms for forwarding
two solutions. The results indicate that audit independence has a positive relationship with audit
quality and credibility, and audit quality has a positive association with audit credibility. This study
used primary data by conducting a survey through the distribution of questionnaires. And the results
of the study prove that accountability has an influence on the quality of the work of the auditor,
while work exper. Keep on browsing if you are OK with that, or find out how to manage cookies.
The data were analyzed using the partial least squares structural equation model (SEM-PLS).
Independence cannot be absolute since the auditor is appointed, and paid by the client. You can
download the paper by clicking the button above. To browse Academia.edu and the wider internet
faster and more securely, please take a few seconds to upgrade your browser. Adobe Express Go
from Adobe Express creation to Issuu publication. Icaewfirms.co.uk (2007) confirms that in the UK,
the ICAEW is not only the country’s most important accountancy institution with a membership of
over 126,000 entities, but also the biggest in Europe. Methodology - The study employed a cross-
sectional descriptive study design and used primary data. Without definite independence, audits have
little value. Audit independence refers to the notion of complete freedom on the part of an auditor
while presenting an audit opinion. The purpose of safeguards approach is to enable the auditor
identify potential risks that pose threat to independence as the basic principles of independence may
not be straightforward in emerging and unique circumstances. This is 100% legal. You may not
submit downloaded papers as your own, that is cheating. Also you. The professional bodies have
issued professional standards that guide the conduct of auditors in their work.
In evaluating the culpability of external auditors, this study investigates the external auditors’
independence as a factor in combating corruption in Nigeria public service. The auditor must
safeguard himself or herself from self-interest threats by abstaining from any direct or indirect
financial interest in the audit work (Flood, 2012). The method employed for the research is a desk
system of research design, in which data were collected through secondary sources such as journals,
books and internet materials. This situation seemingly continues unabated under the watchful eyes of
external auditors saddled with the responsibility of reviewing the operations of public service
agencies. The data were analyzed using the partial least squares structural equation model (SEM-
PLS). In the Enron scandal the firm was able to get away with the con due to the fact that its auditor,
Author Anderson, was an accomplice in the fraud. A cardinal facet of hearer independency is
guaranting that other services provided to an audit client do non impair the hearer 's objectiveness. It
thus extends the frontiers of knowledge on critical factors affecting AI in a developing country
context and has implications for theory, policy and practice. In this case, the auditor should not be a
promoter of the shares or securities of the client and should not act in litigation or solving of disputes
with third parties. Section 409 requires urgent public information about any alteration in financial
condition or activities. The finding of the review indicates that the most mentioned threats to auditor
independence are non-audit services, audit tenure, auditor-client relationship and client importance.
The concept of independence is very important in enhancing the contributions of the audit profession
to the sustainable development of the overall economy and the issue has becoming a discourse of
academics, professional and regulators in developed and emerging economies, studies addressing the
issue in Ethiopian and other least developing countries audit market context are scantly available.
Further, weaken independence of external auditor is a serious challenge for the government bodies
that make tax liability assessment and regulatory duties on the basis of audited financial reports.
Over-dependency on audit fees and auditors offering other management services to client companies
were found to be prevalent and more damaging external auditing challenges. This literature review is
conducted based on published articles during the period 1976-2013 in nine leading journals related
to auditing. Intrinsic ethical concentration and extrinsic stimulus are hypothesized to become the
antecedents of audit independence by using professional oversight as a moderator. Issuu turns PDFs
and other files into interactive flipbooks and engaging content for every channel. Three are different
threats that occasion impairment on auditor’s objectivity such as the self-interest threats that include
financial and personal interests (Basu, 2009). In addition, this study also found that ethics did not
moderate the influence of auditor independence on audit quality, ethics did not moderate the effect
of auditor integrity on audit quality and ethics did not m. No pre-2001 scandal was as massive as the
Enron disaster that Pbs.org (2002) recalls involving filing for the biggest Chapter 11 bankruptcy in
US history on December 4, 2001. The professional code of conduct at international and local levels
as well as the commercial codes that govern the business and economic endeavors stated that
professional accountants must be competent and independent to undertake an audit and assurance
services. Sampling using purposive sampling, with a total sample of 90 respondents. The empirical
results support the ideology that auditor independence and reputation can significantly affect the
perceived auditor quality and credibility in the audited financial statements as well as the market
prices. This article seeks to underscore the pivotal importance of auditing and the function of audit
impartiality in guaranteeing the dependability and credibility of financial information utilized in
credit and investment resolutions. Further, weaken independence of external auditor is a serious
challenge for the government bodies that make tax liability assessment and regulatory duties on the
basis of audited financial reports. Further, weaken independence of external auditor is a serious
challenge for the government bodies that make tax liability assessment and regulatory duties on the
basis of audited financial reports. International Financial Reporting Standards (IFRS) adoption will
go a long way to improve transparency of managers and in turn enhance audit quality. In the realistic
phenomenon, auditors have been constantly judged on their personal qualities, which directly
indicate to the appropriateness of the concept of Auditor independence and scepticism. The preparers
opine that failure to rotate auditors and the control of auditor appointment and remuneration by the
board is more AI constraining, relative to the opinions of both the auditor and user regarding these
factors. We conclude that the mixed evidence, together with recent regulatory changes, provides
opportunities for future research on auditor independence and audit quality.
This has led to the new legislation that has emphasised the importance of external auditors to be
independent from the corporations they audit. Wyman (2004) adds that the ICAEW works to make
certain that not only the topmost-caliber persons are enrolled into accounting jobs, but also that they
get the best possible training to turn them into excellent auditors. There were 138 questionnaires
distributed around June until July 2023, but only 125 questionnaires returned so that response rate
was 90,58%. The results indicate a positive and significant correlation between audit quality and
audit efficiency, the reputation of auditing office, auditing fees, the size of audit firm, and the
proficiency of auditor. Based on the findings of the study, the researcher recommended that for audit
firms in Ethiopia and other concerned bodies haveto work on statistically significant variables due to
fact that they have positive influence on auditors' independence. An auditor must be watchful to any
harmful impacts on his planning, investigation, or reporting to preserve independence under the
numerous pressures from clients. Download Free PDF View PDF Assessingthe roles of Audit
Committees and Internal Audit in some Selected Public Universities of Ghana IOSR Journals
Download Free PDF View PDF AUDITORS' INDEPENDENCE AND AUDIT QUALITY IN
NIGERIA Science and Education Development Institute (SEDInst) Audit quality is expected to be
enhanced if auditor's independence is assured. Rotation of audit staff and partners will safeguard the
familiarity threat and minimise self-interest threats to independence (Flood, 2012). It is not arguable
that weak or lack of auditors' independence impairers the quality of the audit profession and
diminishes the public trust on auditor's assurance. A six-dimensional model of AI undermining
factors was fitted and a five-dimensional model best fitted for AI enhancing factors. Hypothetically,
however, the study revealed that these two factors contribute insignificantly to the effectiveness of
internal audit function. The purpose of safeguards approach is to enable the auditor identify potential
risks that pose threat to independence as the basic principles of independence may not be
straightforward in emerging and unique circumstances. In the UK, while many regulations have been
put in place to ensure and promote auditor independence, there is much more that can be done by the
government as well as by audit clients. The purpose of this exploratory study is to review existing
empirical studies on auditors independence to developed a theoretical framework that facilitate
further studies in least underdeveloped audit market. The studies also contain cases where the non-
audit fee was 10 to 12 times higher than the audit fee. Besides shareholders, other stakeholders like
investors, bankers, bonding agencies and other creditors depend on audited financial reports to
initiate or enhance business with those organisations. In that light, the paper will investigate a sample
of United States firms to evaluate the auditors independence on the clients. Abstract: This research
aims at investigating the effects of audit independence, quality, and credibility on reputation and
sustainable success of CPAs in Thailand. Social Posts Create on-brand social posts and Articles in
minutes. Download Free PDF View PDF See Full PDF Download PDF Loading Preview Sorry,
preview is currently unavailable. Three are different threats that occasion impairment on auditor’s
objectivity such as the self-interest threats that include financial and personal interests (Basu, 2009).
Therefore if the auditor’s report was not particularly favourable for the CFO, the CFO could decide
to fire them and choose an auditor who would be willing to express a much more favourable view of
the financial accounting of the corporation. The purpose of this exploratory study is to review
existing empirical studies on auditors independence to developed a theoretical framework that
facilitate further studies in least underdeveloped audit market. This then led to the Sarbanes-Oxley
Act of 2002 which gave the responsibility of choosing an auditor to an audit committee rather than
the CFO (Locatelli, 2002). Using physical evidence has a limitation because things may not always
look as how they appear. The auditor can involve additional accountants to review the work or
consult third parties such as professional body and committee of independent directors. As stated by
Lavin (1977:237), in order to perform their role, it is essential that, auditors are independent of the
client company and are not seen to have any motive for none disclosure of misleading information.
In general the purpose of external auditors in society is to give reasonable assurance on fairnes the
truthfulness of financial statements. However, the study suggests that the Ghanaian AC has only an
audit report implementation responsibility in reference to the enabling parliamentary act. Adelopo, I.
2012. Auditor independence: auditing, corporate governance and market confidence.
Some threats that affect independence include self interest threats, self review threat, management
threats, advocacy threats, familiarity threats and intimidation threats. The importance of emphasizing
strong corporate governance has grown as a result of various failures (such as bankruptcy and fraud)
and financial scandals, which include the manipulation of earnings reports to enhance the quality of
financial reporting (Zeleke Belay, 2007). Auditor independency is a important determiner in the
bringing of audit quality. Independence continues to be a problem when it comes to finding out how
accurate and credible investor finan. This was an attempt to solidify their relationships with the
corporation’s management therefore maintaining them as clients. Independence cannot be absolute
since the auditor is appointed, and paid by the client. Download Free PDF View PDF Perceptions of
Accountants on Factors Affecting Auditor’s Independence in Nigeria Prof. The results indicate that
audit independence has a positive relationship with audit quality and credibility, and audit quality has
a positive association with audit credibility. Both theoretical and managerial contributions are
explicitly provided. Many stakeholders of large firms are demanding credible, reliable and accurate
audited financial statements and were suspecting that some external auditors were biased and less
independent to the day to day operations of the executive management to meet corporate
governance standards. Internal auditors can actually “enhance a corporation’s accounting and
internal control efficiency” (Kim, Nofsinger, Mohr, 2010b). Section 409 requires urgent public
information about any alteration in financial condition or activities. Therefore the lack of auditor
independence may impact adversely on an audit in many different ways. Unlike studies in developed
countries, few of the previous studies in developing countries were not motivated by notable failure
of companies and audit firm scandals, but they indicated that there is a frequent appeal of major
financial statement users such as taxing authorities and banks that are in a difficult situation of
accepting audited financial reports as a credible and dependable for financial and economic
decisions. Describe the auditor's responsibility for considering a client's internal controls Describe the
auditor's responsibility to detect material misstatements due to fraud Identify red flags present during
the audits of CUC International, Inc.'s financial statements, which suggest weaknesses in the
company's control environment (CUC was the predecessor company to Cendant Corporation)
Identify red flags present during. The auditor is expected to monitor the integrity of the financial
statements, review the internal financial controls, review the effectiveness of the internal audit
department, and provide non-audit services while considering the ethical guidelines concerning the
auditor’s work. Likewise, audit quality and credibility significantly influence on reputation that is
also related to sustainable success. The more the fees, the more likely to auditor may be tempted to
manipulate accounting figures and exploit accounting standards (Bode, 2008). The goal is to
contribute to a better understanding of the division of conversational labor, male-female distinct
“interactional styles”, politeness strategies used by women and men. Inconsistencies in measuring
auditor independence by using diverse proxies have resulted in conflict ing findings in evaluating the
constituents of auditor independence. Corruption Eradication Commission (KPK) named Supreme
Audit Agency (BPK) members as suspects in the drinking water bribery case because an abnormal
value was found in the financial statements and in 2017 the BPK auditor was caught in the practice
of purchase and sale opinions on the financial statements of the Ministry of Villages. The paper
contributes to the auditing literature by providing some insights into the concept of auditor
independence in public sector organisations within the context of national legislation and
international best practice in the auditing profession. Just talk to our smart assistant Amy and she'll
connect you with the best. To browse Academia.edu and the wider internet faster and more securely,
please take a few seconds to upgrade your browser. This can be indicated by the existence of fraud
in the audit results which makes the quality of the audit doubtful. Sampling using purposive
sampling, with a total sample of 90 respondents. Hermes.co.uk contends that public concern about
auditor independence stems from auditors’ tendency to diversify to other non-audit services such as
legal consulting, IT consultancy, corporate finance and management consulting. Through use of
safeguards, the auditor is able to gain more knowledge of the client and enhance the quality of audit
services (Basu, 2009). Methodology - The study employed a cross-sectional descriptive study design
and used primary data. In general it was found that the respondents believe that audit quality in the
Jordanian banking sector ranges from satisfactory to very good.