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    Auditor Independence in Fact: Research, Regulatory, and...
    research summary posted July 27, 2015 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics, 09.0 Auditor Judgment, 09.01 Audit Scope and Materiality Judgments 
    Auditor Independence in Fact: Research, Regulatory, and Practice Implications Drawn from Experimental and Archival Research.
    Practical Implications:

    The analysis suggests that a holistic synthesis of the independence literature requires one to carefully consider methodological choices underlying a given study. Such an understanding is necessary to appreciate the context and meaning of the reported findings in relation to the greater body of literature and ongoing concerns of regulators.


    Church, B. K., Jenkins, J. G., McCracken, S. A., Roush, P. B., & Stanley, J. D. 2015. Auditor Independence in Fact: Research, Regulatory, and Practice Implications Drawn from Experimental and Archival Research. Accounting Horizons 29 (1): 217-238.

    auditor independence, independence in fact, independence regulation, auditor judgment
    Purpose of the Study:

    The essence of factual independence encompasses the auditor’s ability and willingness to suppress bias and report honestly. A lack of independence can lead to biased judgments, indicating a failure in the audit process, but such failures do not necessarily reduce the quality of audit outputs. Process failures increase the likelihood that the quality of audit outputs is lowered; however, this relationship is by no means one-to-one. Notwithstanding various safeguards intended to enhance auditor independence in fact, regulators including the PCAOB have continued to express concerns that auditors, at times, are failing to maintain an appropriate level of independence. In this paper, the authors provide an analysis of selected academic studies related to auditor independence to offer readers a foundation on which to evaluate the substantial body of research in the area and to understand the mixed findings reported in experimental and archival studies. The authors discuss issues surrounding the research designs and methods used in prior work, highlighting challenges that face researchers. 

    Design/Method/ Approach:

    This paper analyzes information from selected academic studies related to auditor independence. 


    In this paper, the authors explore specific experimental and archival research relevant to the effects of independence on (1) auditors’ judgments and decisions that underlie the audit process and (2) observable audit outputs. The examination of experimental studies suggests that cognitive and motivational biases have the potential to impair independence and, consequently, weaken the audit process. By comparison, the examination of archival studies fails to definitively link test variables (i.e., auditor fees and lengthy auditor tenure) with evidence of compromised independence. Taken as a whole, the findings suggest that, although judgmental biases may hinder the audit process, such biases do not necessarily degrade audit outputs. 

    Auditor Judgment, Independence & Ethics
    Audit Scope & Materiality Judgements