Is Auditor Independence Influenced by Non-Audit Services? A Stakeholder’s Viewpoint?

Abstract

The auditor may provide numerous services to their clients covering audit and non-audit services (NAS). These services have been considered as a combination of services offering varying results for client firms. The mixed results reported by past studies in measuring the relation between NAS and auditor independence had generated the need for further investigation. Moreover, the dearth of literary evidence from a developing country like Pakistan also created a need for such a study. Considering the gaps left unaddressed in past studies, the current study aims at investigating the possible relationship between NAS and auditor independence.

Data of the study was collected from three stakeholders of audit (i.e. accountants, finance managers, and internal auditors). Data collected through the questionnaire proved that various respondent groups have different opinions about the said relationship. It was observed that NAS was believed to have positive, negative, and no effects on auditor independence. Moreover, occupational level, experience and educational level of the respondents were also observed to have a significant bearing on the opinion about NAS and auditor independence relationships.

The changing dynamics of the audit profession with abridged trust in its services, caused by NAS, have created the need for investigation focusing on views of various stakeholders of such services. This study attempts to provide empirical evidence on the varied perspectives.

Keywords: Auditor independence, Internal auditors, Non-audit services, Pakistan