The Impact of Revolving Door Practice and Revolving Door Policy on Nonprofessional Investors' Perceptions of Auditor Independence

Autor: Reginald Wilson
Rok vydání: 2015
Předmět:
Zdroj: SSRN Electronic Journal.
ISSN: 1556-5068
DOI: 10.2139/ssrn.2721223
Popis: This study is the first to investigate (1) whether United States’ nonprofessional investors perceive an ex-auditor’s employment with an audit client as a threat to the accounting firm’s independence, and (2) whether the strength of the current United States revolving door policy improves independence. This study is motivated by the underrepresentation of nonprofessional investors in the literature, despite them owning approximately thirty-eight percent of the United States equity holdings. Two between-subjects experiments examine these issues. The first experiment finds that investors perceive the ex-auditor’s integrity as significant in explaining the firm’s decision to manage earnings, irrespective of the firm’s previous working relationship with the ex-auditor. The results from experiment two indicate that investors’ perceptions of revolving door firms’ independence do not significantly improve by strengthening the revolving door policy above the American Institute of Certified Public Accountants’ initial policy. Therefore, accounting regulators may consider reducing the stringency of the current revolving door policy to attract prospective audit employees to public accounting. Academics may also be interested in the triangulation of the independence “in appearance” findings in this study the independence “in fact” findings in prior research.
Databáze: OpenAIRE
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