Client influence and auditor independence revisited: Evidence from auditor resignations
| Autor: | Tom Adams, Jagan Krishnan, Jayanthi Krishnan |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
040101 forestry
Auditor's report Sociology and Political Science Potential risk business.industry media_common.quotation_subject 05 social sciences Going concern Sample (statistics) Accounting 050201 accounting 04 agricultural and veterinary sciences Audit Auditor independence Independence Litigation risk analysis Quality audit Bargaining power 0502 economics and business 0401 agriculture forestry and fisheries Business Construct (philosophy) media_common |
| Zdroj: | Journal of Accounting and Public Policy. 40:106846 |
| ISSN: | 0278-4254 |
| DOI: | 10.1016/j.jaccpubpol.2021.106846 |
| Popis: | Financial scandals such as those surrounding the Enron-Andersen debacle provoke concerns that auditors lack independence when faced with influential clients, and are unwilling to respond to client risks by resigning. Unlike previous studies that examine whether client influence affects audit quality on ongoing engagements (and provide mixed results), we investigate whether office-level client influence affects auditor resignations from risky clients for whom the resignation decision is most salient. Using a sample of risky clients, we find that (1) auditors are more likely on average to resign from influential clients, and (2) this positive association holds for non-Big N auditors, auditors in smaller offices, and non-specialist auditors. We speculate that audit firms or audit offices that have inadequate mechanisms to mitigate independence risk use resignation as a tool to counter such risk. This is consistent with the suggestions offered in professional guidance. Also, importantly, the effect of client influence is distinct from that of client size. Influential clients are prevalent across the spectrum of absolute client size, and the positive association between client influence and auditor resignations occurs for both large and small clients. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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