Political Connections: A Threat to Auditor Independence?

38 Pages Posted: 26 Oct 2011

See all articles by Effiezal Aswadi Abdul Wahab

Effiezal Aswadi Abdul Wahab

Curtin University - School of Accounting

Mazlina Norzila Mat Zain

Multimedia University - Faculty of Management

Rashidah Abdul Rahman

Universiti Teknologi MARA (UiTM) - Bureau of Research and Consultancy (BRC)

Date Written: October 26, 2011

Abstract

This study examines whether political connections further impair auditor independence when auditor provides non-audit services in Malaysia. We examine whether political connections moderate the relationship between non-audit fees and audit fees. Based on two proxies of political connections namely politically connected firms and the proportion of Bumiputras directors, we find a positive and significant relationship between non-audit fees and audit fees, and the relationship becomes weaker, only for politically connected firms. Nonetheless, the results suggest that political connections could pose a threat to auditor independence in both appearance and in mind.

Keywords: audit independence, non-audit fees, audit fees, political connections, ethnicity

JEL Classification: G34, G38, M41, M42

Suggested Citation

Abdul Wahab, Effiezal Aswadi and Mat Zain, Mazlina Norzila and Rahman, Rashidah Abdul, Political Connections: A Threat to Auditor Independence? (October 26, 2011). Available at SSRN: https://ssrn.com/abstract=1949742 or http://dx.doi.org/10.2139/ssrn.1949742

Effiezal Aswadi Abdul Wahab (Contact Author)

Curtin University - School of Accounting ( email )

Australia

Mazlina Norzila Mat Zain

Multimedia University - Faculty of Management ( email )

Persiaran Multimedia
Cyberjaya, Selangor Darul Ehsan
Malaysia
+603 83125772 (Phone)
+603 83125590 (Fax)

HOME PAGE: http://www.mmu.edu.my

Rashidah Abdul Rahman

Universiti Teknologi MARA (UiTM) - Bureau of Research and Consultancy (BRC) ( email )

40450 Shah Alam
Malaysia
+03 55442090 (Phone)

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