Do "Superstar" CFOs Impair Auditors' Independence?

• In Event: "Superstar" CFOs, Fraud Detection Proficiency, and Impression Management

Abstract

The study examines the potential threat to an auditor’s independence which may result from the extraordinarily favorable professional and personal reputation (superstar status) of an audit client’s CFO. This potential threat to auditors’ independence is referred to as a halo effect bias which can distort an individual’s judgment and behavior. Thorndike (1920) defines the halo effect as a “marked tendency to think of the person in general as rather good or rather inferior and to color the judgments of the qualities by this general feeling”. The Bernie Madoff Ponzi scheme demonstrated how an extraordinarily well respected individual (superstar status) can distort the judgment of knowledgeable and normally skeptical individuals. An experiment will be conducted to examine the potential threat of a superstar CFO on an auditor’s independence. In addition, the experiment will be designed to examine whether the halo cognitive bias has the ability to lessen the impact that an auditor’s professional skepticism has on his or her judgment and behavior during the audit of a client’s financial statement.

Authors

• Oscar J Harvin, Florida Atlantic University

• Oscar J Harvin, Florida Atlantic University