Political Connections: A Threat to Auditor Independence?
38 Pages Posted: 26 Oct 2011
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: Suggested Citation
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