Perceptions of auditor independence: U.K. evidence

Beattie, V., Brandt, R. and Fearnley, S. (1999) Perceptions of auditor independence: U.K. evidence. Journal of International Accounting, Auditing and Taxation, 8(1), pp. 67-107. (doi: 10.1016/S1061-9518(99)00005-1)



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The reality and perception of auditor independence is fundamental to public confidence in financial reporting. A new Independence Standards Board was set up in the U.S. in 1997 and the European Union (EU) is currently seeking to establish a common core of independence principles. The general setting within which audit decisions are made and independence perceptions are formed is evolving rapidly due to competitive and regulatory changes. Policy-makers must work continuously to evaluate the critical threat factors and develop appropriate independence principles. This paper explores the potential of recent regulatory reforms in the United Kingdom (U.K.), many of which are unique to that country, to strengthen the independence framework. Using a questionnaire instrument, U.K. interested parties' perceptions of the influence on auditor independence of a large set of 45 economic and regulatory factors are elicited. Most factors have a significant impact on independence perceptions for all groups (finance directors, audit partners, and financial journalists). The principal threat factors relate to economic dependence and non-audit service provision, while the principal enhancement factors relate to regulatory changes introduced in the early 1990s (the existence of an audit committee, the risk of referral to the Financial Reporting Review Panel and the risk to the audit firm of loss of Registered Auditor status). Exploratory factor analysis reduces the factor set to a smaller number of uncorrelated underlying dimensions.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Beattie, Prof Vivien
Authors: Beattie, V., Brandt, R., and Fearnley, S.
Subjects:H Social Sciences > HF Commerce > HF5601 Accounting
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of International Accounting, Auditing and Taxation
Publisher:Elsevier Ltd.
Copyright Holders:© 1999 Cognitive Science Society, Inc. Published by Elsevier Science Inc.
First Published:First published in Journal of International Accounting, Auditing and Taxation8(1)67-107
Publisher Policy:Reproduced in accordance with the copyright policy of the publisher

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