A Consideration of Forces Surrounding Auditor Independence in Fact: A Literature Synthesis and Review

• In Event: Breakfast and Research Forum
  In Roundtable Session: Table 13: Literature Review/Synthesis

Abstract

The PCAOB has expressed continuing concerns related to auditor independence, stemming at least partially from their inspections of audit firms. While details of inspections are not generally publicly available, the PCAOB has indicated that inspectors continue to find evidence suggesting that auditors, in some instances, do not exhibit the proper degree of independence (PCAOB 2011a). Accordingly, the PCAOB called for a renewed public debate about ways to enhance and protect auditor independence in fact. This paper is the result of a request by the PCAOB to summarize academic literature related to auditor independence. We summarize the literature along two dimensions. First, we discuss research related to economic and social bonding, factors that potentially cause auditors to compromise their independence. Second, we discuss research on countervailing forces that are intended to protect and enhance auditor independence. Although our review and synthesis provide some evidence of circumstances in which auditors lack independence, the majority of studies find little to no evidence of systematic independence problems. We conclude our paper with suggestions for future research, which we believe will aid in understanding more fully the potential for compromised independence and the role of current countervailing forces in protecting auditor independence.

Authors

• Bryan Church, Georgia Institute of Technology

• James Greg Jenkins, Virginia Tech University

• Susan A McCracken, McMaster University

• Pamela Barton Roush, University of Central Florida

• Jonathan D Stanley, Auburn University