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Key words
Auditor Independence, Competition, Credibility, Literature Review
Abstract
Purpose: The purpose of the current research is to review literature related to auditor independence. More specifically, this review will examine whether the size of the audit firm, the size audit fees, the auditor's duration with the client, competition among other firms and the availability of non-audit services will compromise auditor independence.
Design/methodology: This paper reviews empirical studies to assess what researchers have done about auditor independence related issues and identify gaps in the literature where further research is needed.
Findings: The top determinant of auditor independence was not clear; however, other researches ranked them based off importance because of their hypothesis that they chose to test. It is evident that independence remains a going concern when discovering how reliable and credible financial statements are to investors.
Practical implications: This study highlights the importance of auditor independence attributes and this research is expected to serve as a guide in understanding the importance of auditor independence and the challenges auditors face.
Originality: This paper provides valuable insights for researchers and practitioners of auditor independence attributes.
1.Introduction
Independence is a major concern in the auditing profession. Corporate scandals like Enron failure confirmed the importance of credulity of audits. Audit independence refers to the ability of the external auditor to act with integrity and impartiality during his/her auditing functions (Akpom and Dimkpah, 2013). Recent challenges of the audit independence assumption have impelled the accounting profession to consider ways of improving the credibility of audit reports (Shockley, 1981, p.785). As a result, the accounting profession has considered new ways to improve the credibility of audits. It is constantly facing pressure from the media, stakeholders and investors to minimize.
According to Shockley (1981, p.785), "the value of auditing services depends upon the fundamental assumption that certified public accountants are independent of their clients". What is auditor independence? It can be described as having an unbiased viewpoint while performing audit test, analyzing the results and confirming the audit report. Auditor independence increases "the effectiveness of the audit by ensuring that the auditor plans and carries out the audit objectively" (Chepkorir, 2013, p.2). Researchers argue auditing has three different functions: monitor the actions of managers, enhance the information environment and provide a...