Perceptions of auditor independence: U.K. evidence |
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| Institution: | 1. Vivien Beattie is Professor of Accounting in the Department of Accounting, Finance and Law, University of Stirling, Department of Accounting, Finance and Law, University of Stirling, Stirling, FK9 4LA, UK;2. Department of Accounting and Management Science, University of Portsmouth, Locksway Road, Milton, P048JF UK;1. University of Athens Medical School, Athens, Greece;2. University of Antwerp, Antwerp, Belgium;3. Municipal Institute for Emergency Medicine Novi Sad, Novi Sad, Serbia;4. Medical School, University of Crete, Heraklion, Greece;5. Ethics Committee of the European Society for Emergency Medicine (EuSEM), London, UK;6. Warwick Medical School, University of Warwick, Coventry, UK;7. Critical Care Unit, Heart of England NHS Foundation Trust, Birmingham, UK;8. University Hospital Bern and University of Bern, Bern, Switzerland;9. Royal College of Nursing Research Institute, Warwick Medical School, University of Warwick, Coventry, UK;10. University Hospital and University Ghent, Ghent, Belgium;11. Federal Department Health, Ghent, Belgium;12. University of Athens, Medical School, Athens, Greece;13. Midwestern University, Chicago, IL, USA;1. Boston College, Carroll School of Management, Chestnut Hill, MA 02147, USA;2. Clemson University, College of Business and Behavioral Science, Clemson, SC 29634, USA;1. The University of Notre Dame Australia, School of Law and Business, Australia;2. The University of the Witwatersrand, School of Accountancy, South Africa;3. Leeds University Business School, United Kingdom;1. Department of Accounting, Qazvin Branch, Islamic Azad University, Qazvin, Iran;2. Imam khomeini International University, Qazvin, Iran;1. Joseph M. Katz Graduate School of Business, University of Pittsburgh, United States;2. Charles W. Lamden School of Accountancy, Fowler College of Business, San Diego State University, United States;3. Eller College of Management, University of Arizona, United States |
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| Abstract: | The reality and perception of auditor independence is fundamental to public confidence in financial reporting. A new Independence Standards Board was set up in the U.S. in 1997 and the European Union (EU) is currently seeking to establish a common core of independence principles. The general setting within which audit decisions are made and independence perceptions are formed is evolving rapidly due to competitive and regulatory changes. Policy-makers must work continuously to evaluate the critical threat factors and develop appropriate independence principles. This paper explores the potential of recent regulatory reforms in the United Kingdom (U.K.), many of which are unique to that country, to strengthen the independence framework. Using a questionnaire instrument, U.K. interested parties’ perceptions of the influence on auditor independence of a large set of 45 economic and regulatory factors are elicited. Most factors have a significant impact on independence perceptions for all groups (finance directors, audit partners, and financial journalists). The principal threat factors relate to economic dependence and non-audit service provision, while the principal enhancement factors relate to regulatory changes introduced in the early 1990s (the existence of an audit committee, the risk of referral to the Financial Reporting Review Panel and the risk to the audit firm of loss of Registered Auditor status). Exploratory factor analysis reduces the factor set to a smaller number of uncorrelated underlying dimensions. |
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