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    Auditors’ Identification with their Clients and its Effect o...
    research summary posted April 16, 2012 by The Auditing Section, last edited May 25, 2012, tagged 04.0 Independence and Ethics, 04.09 Individual & Team Conduct - e.g., premature signoff, underreporting hours, 09.0 Auditor Judgment 
    Auditors’ Identification with their Clients and its Effect on Auditors’ Objectivity
    Practical Implications:

    The results of this study are important for audit firms to consider in designing their independence training sessions.  It is important to encourage audit employees to gain familiarity and knowledge with their clients to increase the overall quality of the audit.  However, if increased familiarity results in audit employees identifying more with their clients as opposed to the audit firm, it can cause a decrease in independence and objectivity.  The results of this study indicate that experienced auditors and auditors with a greater sense of identification with the CPA profession are less likely to “give-in” to their clients.  Audit firms should focus on instilling a sense of duty to the audit firm and the CPA profession early on in their training sessions. 


    Bamber, E.M. and V.M. Iyer. 2007. Auditors’ Identification with their Client and its Effect on Auditors’ Objectivity. Auditing: A Journal of Practice and Theory 26 (2): 1-24.

    Auditor objectivity, auditor independence, client identification, professional identification, and social identity theory
    Purpose of the Study:

    Recently there has been increased regulatory focus on auditor independence and objectivity.  In a 2000 exposure draft, the Independence Standards Board identified auditors’ familiarity with the client as one of five threats to auditor independence.  The underlying concern expressed by regulators is that certain relationships (“close ties”) between the auditor and the client are inappropriate because they impair auditors’ objectivity in performing the audit, which in turn contributes to perceived audit failures.  This paper addresses this concern by investigating whether auditors unconsciously/unknowingly jeopardize their independence and objectivity based on their relationship with their clients.  Below are three objectives that the authors address in their study: 

    • Examine the extent to which auditors begin to identify more with their clients as opposed to their audit firms (e.g. employer).  Causes include years spent on the client engagement, client importance, and client image.  An example, not included in the
      article, would be auditors that serve Fortune 500 clients for many years.  Given the demands of these clients, the auditor will likely spend the majority of their year at the client site, rarely going to the audit firm office.  Given this, it is possible that the auditor will begin to identify and adopt the culture of the client opposed to the audit firm. 
    • Examine outcomes of auditors’ identification with their clients.  Specifically, the authors evaluate whether auditors that identify more with their client are more likely to “give-in” to client pressures and allow the client to take aggressive accounting positions.  
    • Examine other factors that might increase or decrease the effect of client identification on the likelihood that the auditor will give-in to client pressure.  These include client size, firm tenure with the client, auditor experience, and auditor’s identification with the CPA profession. 
    Design/Method/ Approach:

    The authors collected their evidence via research questionnaires mailed to AICPA members employed as auditors at Big 5 audit firms in the early 2000s time period.  Survey participants were asked questions about client identification, professional identification, and client image and then were asked to perform a case that dealt with auditors’ behavior in an audit conflict situation. 

    • The authors find that auditors do identify with their clients, although there is significant variability across auditors’ level of client identification and, on average, client identification is lower than professional identification.  
    •  The authors find that auditors that have greater identification with their client are more likely to agree with the client-referred position regarding a materiality issue and not recommend recording an adjustment for unrecorded liabilities.  However, the authors find that auditors that have more experience and greater identification with the CPA profession are less likely to agree with the client preferred position.  The authors interpret these results as support for recent efforts by regulators and  accounting firms to emphasize the tone at the top and to push professional values down the firm hierarchy.  
    • The authors find that increases in client size and audit firm tenure do not appear to increase the likelihood that the audit firm will give-in to theclient-preferred position. 
    Independence & Ethics, Auditor Judgment
    Individual & team conduct (e.g. premature signoff - underreporting hours), Auditors’ Professional Skepticism
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