Auditor Independence in Appearance: An Examination of Perception Differences between Accountants and Non-Accountants

Abstract:     
Using non-accounting business students as a proxy for general public and senior accounting students as a proxy for accounting professionals, this study investigates the effect of ten different independent scenarios dealing with auditors’ appearance of independence on the chance that the auditor will not report a material misstatement in the financial statements. The results show that there are significant difference between accounting and non-accounting respondents when the auditor has a material direct financial interest in the client, when the auditor’s family members have a material direct financial interest in the client, when the auditor’s next of kin has a key position in the client, or when the auditor receives a more favorable loan term from a car dealer through the client arrangement. We did not find any differences between male and female respondents with respect to their perceptions of the ten scenarios in this study.

Number of Pages in PDF File: 29

Keywords: Appearence of Independence, Accountants vs non-accountants

JEL Classification: M41

working papers series