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    Is it time for auditor independence yet?
    research summary posted February 17, 2015 by Jennifer M Mueller-Phillips, tagged 04.0 Independence and Ethics 
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    Title:
    Is it time for auditor independence yet?
    Practical Implications:

    The failure of auditor independence in the United States has contributed to the collapse of corporations, the loss of jobs, and a widespread lack of trust in the U.S. financial system. Despite paying a dear cost, our society thus far has failed to act to create a truly independent auditing system. Meaningful reform is needed to avoid future disasters.

    For more information on this study, please contact Max H. Bazerman.

    Citation:

    Bazerman, M. H., and D. Moore. 2011. Is it time for auditor independence yet? Accounting, Organizations and Society 36: 310-312. 

    Purpose of the Study:

    Even after the collapse of Enron, its auditor Arthur Andersen, and other firms in a wave of accounting scandals, U.S. society continues to tolerate a financial system in which auditing firms face incentives to please their clients despite their legal obligation to provide unbiased audits. To create the type of auditor independence needed to protect our financial markets, the authors argue that auditors should only provide auditing services, that auditing firms should work on contracts for a limited number of years, and that individual auditors should be barred from accepting positions with client firms for a set number of years. Two significant barriers stand in the way of these reforms. First, accounting firms exert significant political influence on national elections through their campaign donations and lobbying efforts. Second, the human tendency to prefer the status quo over change has led many to insist that more evidence is needed to warrant industry-wide change. To avoid a greater financial toll on our society, executives and academics should work to create a truly independent auditing system.

    Design/Method/ Approach:

    This is an opinion piece and not an experimental study.

    Findings:

    This paper does not present research findings

    Category:
    Independence & Ethics