Empirical analysis examines how competition, firm size, and advisory services affect perceived auditor independence.
Key Points
This research aims to understand how various factors impact perceptions of auditor independence.
Conducted factorial analysis of variance on perceptions from four groups: Big Eight partners, local CPA partners, loan officers, and financial analysts.
Collected judgments through an experimental task focused on audit independence factors.
Analyzed effects of competition, management advisory services, audit-firm size, and tenure on perceived independence risk.
Highly competitive audit environments are perceived to increase the risk of losing independence.
Firms providing management advisory services are also seen as having a higher independence risk.
Smaller audit firms face greater perceived independence risks compared to larger firms.
Audit tenure with a client is not seen as a significant factor affecting independence perception.
Cite This Study
Randolph A. Shockley (1981) studied this question.