Abstract This article presents a study, which deals with the question of auditor ability to perform management advisory services (MAS) and remain independent, both in actuality and appearance. This study extends the prior analysis by considering effects of MAS performance on investment decisions and on perceived financial statement reliability for varying levels of MAS performance, equity investment decisions as well as credit granting decisions, and larger investment and loan decisions that are more in line with regulatory concerns. The study raises questions as to whether the performance of MAS results in changes in perceptions of auditor independence. The results of this study challenge extant research which purports to show a statistically and practically significant deterioration, among sophisticated financial statement users, of perceived audit independence, as the level of MAS escalates. The study's results would seem directly relevant to policy setters who have operated under the premise that MAS performance affects perceived auditor independence.
Pany et al. (Wed,) studied this question.