A Closer Look at the Surrounding of Auditors: Good Relationships with Corporate Clients’ Management, How May Auditors Sustain it?

• In Event: Public Interest 1

Abstract

This paper relies on what is documented in the accounting literature in viewing the audit function and auditors in their relationships with managers closely and the possible influence of such relationship on auditor independence. Viewing the interactions between managers and auditors as negotiations, the distribution of power reveals the superior position of management. It also reveals why the auditor participates in what could be seen as a joint venture. Independence may be subject to compromise for sustaining a good tie with corporate client’s management even with existence of monitoring mechanism such as a board of directors. To ensure the issuance of favorable opinions from their current auditors, managers arguably utilize whatever possible means available for them. A thorough audit that displeases client’s management comes with costs for auditors who can be viewed as economic agents serving their own interest. To sustain confidence in attesting and assurance services, auditors arguably must appear independent in the eyes of external parties and assure them that auditors are providing valuable services which assure a “functional” market. Trust placed in auditors and thus in the capital market is granted as long as they appear independent.

Author

• Khalid Rasheed Al-Adeem, King Saud University