Effect of Auditor Independence on Audit Quality: A Review of Literatureinventionjournals
Auditor independence and audit quality are two concepts that work inseparably. Many have argued that auditor independence begets audit quality and as such audit quality cannot be different from the system that produces it. This paper reviews literature related to auditor independence and audit quality in order to determine the effect of the former on the latter. The ex post facto research design is employed. Information for this study was obtained from secondary sources to include journals, text books and other internet materials. Based on the review, findings show that there is a strong relationship between auditor independence and audit quality. The review also revealed four threats to auditor independence, which are client importance, non-audit services (NAS), audit tenure, and client’s affiliation with CPA firms. However, some studies indicated a positive relationship while others showed contrary due to the type of study design employed, sample size, data collection instruments and analysis techniques used. Most of the studies on auditor independence and audit quality were centered on one or two of the threats and majorly done outside Nigeria. Even the ones done in Nigeria were focused on the banking sector. This review therefore, recommends that more investigations should be conducted in Nigeria taking into consideration the four major threats revealed and extend to other sectors like manufacturing, transport, media, education etc.
International Journal of Business and Management Invention (IJBMI) inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
The Effect of Working Experience, Integrity, Competence, and Organizational C...iosrjce
External There search objectives are to seek empirical evidence about the influence of personal
characteristics of the auditor to the audit quality. The population in this study is the auditor who worked on
owned companies in Libya. The data used in this research is the primary data. For the analysis used validity
and reliability test as instrument test. This research used regression analysis and for hypothesis test used F test
and t test. From the result of the research showed that work experience, integrity, competence and commitment
to organizational has significant influence to audit quality. Work experience has the biggest value of arithmetic
and beta coefficient. Hence, the Integrity variable has the strongest influence instead of another variables so
that variable Work experience has a dominant influence toward quality of audit results.
Financial reporting quality has been said to play an important role in reducing information asymmetry. Thus, firms with high financial reporting quality may enhance more investors’ decision. Hence, the basic objective of this study is to determine whether earnings quality influence investors’ decision. The sample consisted of 10 manufacturing companies listed on the Nigerian Stock Exchange Market. The study period is 5 years (2010-2014). Data on accrual quality, volume of investment, Size, age and growth rate and earnings per share were drawn from the published annual report and accounts of the sampled companies. Correlation matrix, Vector auto regressive estimation and Pooled OLS model were employed for the analysis. Diagnostic tests for post estimation were also performed on the model. The result of the Ramsey Reset test shows a p-value of 0.2105, implying that model has no omitted variables. Also, Wooldridge test for autocorrelation in panel data indicates no first-order autocorrelation, showing a p-value of 0.3642. We calculated accruals quality based on the modified accrual model proposed by Mac Nichols in 2002. In this paper, the absolute value of residual error represents the financial reporting quality. This threshold is based on the idea that accruals reduce the smoothing initiated by the change in the cash flow and thus increase the earnings awareness. The study finds evidence of a positive association between investors’ decision and financial reporting quality.
The auditing is simply expressing an opinion on the prepared financial statements. Many scandals in the past years have made the profession a little bit questioned. Many do not want to trust accountants, auditors since auditors were in the core of these issues. Various regulations are there to give a good stance in the profession.
Effect of Auditor Independence on Audit Quality: A Review of Literatureinventionjournals
Auditor independence and audit quality are two concepts that work inseparably. Many have argued that auditor independence begets audit quality and as such audit quality cannot be different from the system that produces it. This paper reviews literature related to auditor independence and audit quality in order to determine the effect of the former on the latter. The ex post facto research design is employed. Information for this study was obtained from secondary sources to include journals, text books and other internet materials. Based on the review, findings show that there is a strong relationship between auditor independence and audit quality. The review also revealed four threats to auditor independence, which are client importance, non-audit services (NAS), audit tenure, and client’s affiliation with CPA firms. However, some studies indicated a positive relationship while others showed contrary due to the type of study design employed, sample size, data collection instruments and analysis techniques used. Most of the studies on auditor independence and audit quality were centered on one or two of the threats and majorly done outside Nigeria. Even the ones done in Nigeria were focused on the banking sector. This review therefore, recommends that more investigations should be conducted in Nigeria taking into consideration the four major threats revealed and extend to other sectors like manufacturing, transport, media, education etc.
International Journal of Business and Management Invention (IJBMI) inventionjournals
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
The Effect of Working Experience, Integrity, Competence, and Organizational C...iosrjce
External There search objectives are to seek empirical evidence about the influence of personal
characteristics of the auditor to the audit quality. The population in this study is the auditor who worked on
owned companies in Libya. The data used in this research is the primary data. For the analysis used validity
and reliability test as instrument test. This research used regression analysis and for hypothesis test used F test
and t test. From the result of the research showed that work experience, integrity, competence and commitment
to organizational has significant influence to audit quality. Work experience has the biggest value of arithmetic
and beta coefficient. Hence, the Integrity variable has the strongest influence instead of another variables so
that variable Work experience has a dominant influence toward quality of audit results.
Financial reporting quality has been said to play an important role in reducing information asymmetry. Thus, firms with high financial reporting quality may enhance more investors’ decision. Hence, the basic objective of this study is to determine whether earnings quality influence investors’ decision. The sample consisted of 10 manufacturing companies listed on the Nigerian Stock Exchange Market. The study period is 5 years (2010-2014). Data on accrual quality, volume of investment, Size, age and growth rate and earnings per share were drawn from the published annual report and accounts of the sampled companies. Correlation matrix, Vector auto regressive estimation and Pooled OLS model were employed for the analysis. Diagnostic tests for post estimation were also performed on the model. The result of the Ramsey Reset test shows a p-value of 0.2105, implying that model has no omitted variables. Also, Wooldridge test for autocorrelation in panel data indicates no first-order autocorrelation, showing a p-value of 0.3642. We calculated accruals quality based on the modified accrual model proposed by Mac Nichols in 2002. In this paper, the absolute value of residual error represents the financial reporting quality. This threshold is based on the idea that accruals reduce the smoothing initiated by the change in the cash flow and thus increase the earnings awareness. The study finds evidence of a positive association between investors’ decision and financial reporting quality.
The auditing is simply expressing an opinion on the prepared financial statements. Many scandals in the past years have made the profession a little bit questioned. Many do not want to trust accountants, auditors since auditors were in the core of these issues. Various regulations are there to give a good stance in the profession.
Impact of corporate governance on firm performance publishedMuhammad Usman
In the light of corporate financial scandals, there is an increasing attention on corporate governance issues. The investors look for emerging economies to diversify their investment portfolios to exhaust the possibilities of returns. This paper examines the impact of corporate governance variables on firms’ performance. This Research found that there is a direct positive relationship between profitability measured either by Earnings per share (EPS) or Return on assets (ROA) and corporate governance, also have a positive direct relationship between each of liquidity, dividend per share, and the size of the company with corporate governance, finally the study found a positive direct relationship between corporate governance and corporate performance. Various studies have been conducted in developing countries including Pakistan to investigate the relationship among corporate governance and firm performance. This study indicates that corporate governance can be measured through the following elements.
(1) board size (2) Female Member (3) CEO duality (4) Education of Directors (5) Board working experience(6) independent directors (7) board compensation (8) Board ownership (9) Audit committee (10) Board composition(11)Leadership Structure
CPAs responsibilities to detect fraud in audits, required approaches, types of financial statement frauds and specific case examples of different types of financial statement fraud
Relationship of Statutory Auditors Competence and Independenc.docxaudeleypearl
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
62 Vilakshan, XIMB Journal of Management, Vol.13 (I), March, 2016
presentation and financial position ...
Relationship of Statutory Auditors Competence and Independenc.docxcarlt4
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
62 Vilakshan, XIMB Journal of Management, Vol.13 (I), March, 2016
presentation and financial position .
Audit Firm Rotation and Audit Report Lag in NigeriaIOSR Journals
Audit firm rotation and audit report lag has been a topical issue to regulators, investors, practitioners and the public at large. Hence, this study is designed to determine the relationship between audit firm rotation and audit report lag in Nigeria. Secondary data gathered from the 2011 annual reports of fifty (50) randomly selected companies, quoted on the floor of the Nigerian Stock Exchange (NSE) were employed in the study. The Ordinary Least Square technique (OLS) was used in the analysis of the relationship between the dependent and independent variables. The study reveals that audit fees, year–end and audit firm type all have positive relationship with audit report lag. The research also establishes that audit firm rotation and company size have a negative insignificant relationship with audit report lag.
AUDITOR’S FEES AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA.pdfOsarenrenAigienohuwa1
The research intensifies effort at determining whether auditor’s independence has any
impact on the audit quality of Nigerian deposit money banks. The study intends to
determine the effect of audit fees on the audit quality of Nigeria deposit money banks.
The study used Ex-Post Facto research design. A total of thirteen (13) deposit money
banks were sampled. Data were taken from the sampled banks' annual reports and
accounts for the years 2010 - 2021. With the help of SPSS version 20.0, simple
regression analysis was conducted to test the assumptions. According to the findings,
audit fees has a direct but insignificant effect on the audit quality of listed Nigerian
deposit money institutions. The researcher therefore recommends that the auditor
should be remunerated on the basis of work experience, qualification, duration of the
audit assignment, and background profile
Appraisal of Audit Independence on Reliance of Financial Report of a Selected...ijtsrd
This study thereby determined the auditor's independence on financial statements of Nigerian hospitals. Specifically, the study intended to determines the effect of tenure of an audit firm on reliability of financial reporting of general hospital, Awka and ascertain the effect of audit fees on reliability of financial reporting of general hospital, Awka. Survey research was adopted for this study. Survey and descriptive research design were adopted. The population of the study consist 127 staff of General hospital, Awka. A sample size of 96 was obtained from a population of 127 Staff using Taro Yamane's formula. From the analysis of data collected, the result revealed that the tenure of an audit firm and audit fees have significant effect on reliability of financial reporting of general hospital. The external auditor's fees should be determined by office of the Auditor General for the concerned state rather than by the hospital management being audited in order to guarantee independence of the auditor in question, also that the tenure of audit firms should always be regulated to avoid too much familiarity. Dim Chinwe E "Appraisal of Audit Independence on Reliance of Financial Report of a Selected Hospital in Awka" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd26803.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/26803/appraisal-of-audit-independence-on-reliance-of-financial-report-of-a-selected-hospital-in-awka/dim-chinwe-e
External Auditors Independence on Accounting Quality of Nigerian Manufacturin...ijtsrd
This study examines the effect of external auditor’s independence on accounting quality of Nigerian manufacturing companies. Specifically, the study ascertain the effect of audit fees on discretionary accruals of manufacturing companies and determine the effect of audit firm tenure on discretionary accruals of manufacturing companies. Ex post facto research design was adopted. The population of the study comprise of Consumer Goods manufacturing companies on the Nigerian Stock Exchange NSE . Ordinary Least Square was used to test the relationship between the independent variables and the dependent variable. The empirical results revealed that the study determined the effect of external auditor’s independence on accounting quality of Nigerian manufacturing companies that there is a significant positive effect of audit firm tenure on discretionary accruals of Nigerian manufacturing companies. Also that audit fees has a non significant positive effect on discretionary accruals of Nigerian manufacturing companies. Auditors’ are responsible for certifying the true and fairness of financial statements. The present study investigates the effect of audit firm tenure, Audit fees, audit firm size, and degree of competition on the level of discretionary accruals as surrogate for accounting quality. The results showed mixed findings. Two proxies audit firm tenure and audit firm size showed a significant positive effect while, audit fees and degree of competition showed non significant positive effect. Based on the empirical results above, the study recommended that firms are advised to consider use of industry specialist auditors against the consideration of ‘name’ alone such like the use of Big 4. Ebubechukwu, Jacinta O | Ofurum, Darlington I "External Auditors Independence on Accounting Quality of Nigerian Manufacturing Companies" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-5 , August 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33021.pdf Paper Url :https://www.ijtsrd.com/management/accounting-and-finance/33021/external-auditors-independence-on-accounting-quality-of-nigerian-manufacturing-companies/ebubechukwu-jacinta-o
Impact of corporate governance on firm performance publishedMuhammad Usman
In the light of corporate financial scandals, there is an increasing attention on corporate governance issues. The investors look for emerging economies to diversify their investment portfolios to exhaust the possibilities of returns. This paper examines the impact of corporate governance variables on firms’ performance. This Research found that there is a direct positive relationship between profitability measured either by Earnings per share (EPS) or Return on assets (ROA) and corporate governance, also have a positive direct relationship between each of liquidity, dividend per share, and the size of the company with corporate governance, finally the study found a positive direct relationship between corporate governance and corporate performance. Various studies have been conducted in developing countries including Pakistan to investigate the relationship among corporate governance and firm performance. This study indicates that corporate governance can be measured through the following elements.
(1) board size (2) Female Member (3) CEO duality (4) Education of Directors (5) Board working experience(6) independent directors (7) board compensation (8) Board ownership (9) Audit committee (10) Board composition(11)Leadership Structure
CPAs responsibilities to detect fraud in audits, required approaches, types of financial statement frauds and specific case examples of different types of financial statement fraud
Relationship of Statutory Auditors Competence and Independenc.docxaudeleypearl
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
62 Vilakshan, XIMB Journal of Management, Vol.13 (I), March, 2016
presentation and financial position ...
Relationship of Statutory Auditors Competence and Independenc.docxcarlt4
Relationship of Statutory Auditors' Competence and Independence
with Audit Quality
Abstract
Quality of Statutory audit depends on competence and independence of the statutory
auditors. The absence of competence and independence of statutory auditors leads to corporate
distress. Literature shows that competence and independence of the auditors in turn depend on
'adequate quality control procedures for statutory audit of financial statements'. And this depends
on 14 independent variables such as auditor's inability to check regulation compliance,
management's influence in auditor's appointment, selection by independent regulatory authority,
whistle blower's protection policy, effectiveness of continuous learning process and its evaluation,
failure to detect accounting frauds, unethical consulting services by auditors, impropriety of
transactions, effectiveness of peer review of audit work, cut-throat competition and reward
system for quality audit. This study is an attempt to investigate into the relationship of auditors'
competence and independence with audit quality. The empirical research was carried out with
responses from 227 Chartered Accountants (CAs) and 132 students pursuing the CA vocations.
Chi-square test, Mann-Whitney test, and correlation coefficients test were used to analyse and
interpret the data. The significant findings are that (i) the relationship between auditors'
competence and independence of statutory auditors were not homogeneous because CAs have
more professional experience than the students; and (ii) the auditors were unable to comply
with all the regulatory formalities as observed by the CAs and students. These factors, in the
opinion of respondents impaired the quality of audit. The competence and independence of
audit quality can be improved by a continuous learning process, periodic check up of propriety
transactions, audit inspection by a peer review Board and monitoring appointment of statutory
auditors.
Keywords: Statutory Audit; Quality Audit; Chartered Accountants; Chi-Square Test; Mann-Whitney
Test; Correlation Coefficient;
Mitrendu Narayan Roy
Research Scholar
Department of Commerce
University of Calcutta, Kolkata
[email protected]
Introduction
An audit is regarded as a quality audit if the auditor is able to identify any doubtful
financial reporting practices and breach of applicable accounting laws in the financial
statements. Corporate enterprise will lose its status if misreporting on the part of the
management is identified and disclosed (Deis and Giroux, 1992). Every corporate enterprise
tries to uphold and increase their existing stakeholder base in this present age of absolute
competition in the financial market. This could perhaps lead them to pump up their financial
Siddhartha Sankar Saha
Associate Professor
Department of Commerce
University of Calcutta, Kolkata
[email protected]
62 Vilakshan, XIMB Journal of Management, Vol.13 (I), March, 2016
presentation and financial position .
Audit Firm Rotation and Audit Report Lag in NigeriaIOSR Journals
Audit firm rotation and audit report lag has been a topical issue to regulators, investors, practitioners and the public at large. Hence, this study is designed to determine the relationship between audit firm rotation and audit report lag in Nigeria. Secondary data gathered from the 2011 annual reports of fifty (50) randomly selected companies, quoted on the floor of the Nigerian Stock Exchange (NSE) were employed in the study. The Ordinary Least Square technique (OLS) was used in the analysis of the relationship between the dependent and independent variables. The study reveals that audit fees, year–end and audit firm type all have positive relationship with audit report lag. The research also establishes that audit firm rotation and company size have a negative insignificant relationship with audit report lag.
AUDITOR’S FEES AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA.pdfOsarenrenAigienohuwa1
The research intensifies effort at determining whether auditor’s independence has any
impact on the audit quality of Nigerian deposit money banks. The study intends to
determine the effect of audit fees on the audit quality of Nigeria deposit money banks.
The study used Ex-Post Facto research design. A total of thirteen (13) deposit money
banks were sampled. Data were taken from the sampled banks' annual reports and
accounts for the years 2010 - 2021. With the help of SPSS version 20.0, simple
regression analysis was conducted to test the assumptions. According to the findings,
audit fees has a direct but insignificant effect on the audit quality of listed Nigerian
deposit money institutions. The researcher therefore recommends that the auditor
should be remunerated on the basis of work experience, qualification, duration of the
audit assignment, and background profile
Appraisal of Audit Independence on Reliance of Financial Report of a Selected...ijtsrd
This study thereby determined the auditor's independence on financial statements of Nigerian hospitals. Specifically, the study intended to determines the effect of tenure of an audit firm on reliability of financial reporting of general hospital, Awka and ascertain the effect of audit fees on reliability of financial reporting of general hospital, Awka. Survey research was adopted for this study. Survey and descriptive research design were adopted. The population of the study consist 127 staff of General hospital, Awka. A sample size of 96 was obtained from a population of 127 Staff using Taro Yamane's formula. From the analysis of data collected, the result revealed that the tenure of an audit firm and audit fees have significant effect on reliability of financial reporting of general hospital. The external auditor's fees should be determined by office of the Auditor General for the concerned state rather than by the hospital management being audited in order to guarantee independence of the auditor in question, also that the tenure of audit firms should always be regulated to avoid too much familiarity. Dim Chinwe E "Appraisal of Audit Independence on Reliance of Financial Report of a Selected Hospital in Awka" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd26803.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/26803/appraisal-of-audit-independence-on-reliance-of-financial-report-of-a-selected-hospital-in-awka/dim-chinwe-e
External Auditors Independence on Accounting Quality of Nigerian Manufacturin...ijtsrd
This study examines the effect of external auditor’s independence on accounting quality of Nigerian manufacturing companies. Specifically, the study ascertain the effect of audit fees on discretionary accruals of manufacturing companies and determine the effect of audit firm tenure on discretionary accruals of manufacturing companies. Ex post facto research design was adopted. The population of the study comprise of Consumer Goods manufacturing companies on the Nigerian Stock Exchange NSE . Ordinary Least Square was used to test the relationship between the independent variables and the dependent variable. The empirical results revealed that the study determined the effect of external auditor’s independence on accounting quality of Nigerian manufacturing companies that there is a significant positive effect of audit firm tenure on discretionary accruals of Nigerian manufacturing companies. Also that audit fees has a non significant positive effect on discretionary accruals of Nigerian manufacturing companies. Auditors’ are responsible for certifying the true and fairness of financial statements. The present study investigates the effect of audit firm tenure, Audit fees, audit firm size, and degree of competition on the level of discretionary accruals as surrogate for accounting quality. The results showed mixed findings. Two proxies audit firm tenure and audit firm size showed a significant positive effect while, audit fees and degree of competition showed non significant positive effect. Based on the empirical results above, the study recommended that firms are advised to consider use of industry specialist auditors against the consideration of ‘name’ alone such like the use of Big 4. Ebubechukwu, Jacinta O | Ofurum, Darlington I "External Auditors Independence on Accounting Quality of Nigerian Manufacturing Companies" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-5 , August 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33021.pdf Paper Url :https://www.ijtsrd.com/management/accounting-and-finance/33021/external-auditors-independence-on-accounting-quality-of-nigerian-manufacturing-companies/ebubechukwu-jacinta-o
International Journal of Business and Management Invention (IJBMI) is an international journal intended for professionals and researchers in all fields of Business and Management. IJBMI publishes research articles and reviews within the whole field Business and Management, new teaching methods, assessment, validation and the impact of new technologies and it will continue to provide information on the latest trends and developments in this ever-expanding subject. The publications of papers are selected through double peer reviewed to ensure originality, relevance, and readability. The articles published in our journal can be accessed online
1 2Cheat Sheet on Evidence and DocumentationACC491J.docxhoney725342
1
2
Cheat Sheet on Evidence and DocumentationACC/491
July 3, 2017Cheat Sheet on Evidence and Documentation
Relevance, Reliability and Sufficiency of Evidence
The basic property of an audit report is that it should entail relevance. The report t should be written in a standard format which is usually mandated by generally accepting the set auditing standards. Accounting is an important task since it ensures financial details of a business are kept considerably clean. Going through the terminologies in order to know everything that is involved in auditing is important when auditing the financial records. The first step involves dividing the field into the foremost part known as the financial statement. Soares (1997). All businesses hold their financial statements in high regards since it is a legal requirement to provide and they provide them when they are requested by relevant bodies. These statements represent the picture of the business in reference to its financial robustness. The audited report reports are used to verify that the details given in their statements. For instance, the public corporations are supposed to ensure that their statements are professionally audited in order to secure their investors’ wealth.
It is important to note that the concept of reliability is of real interest to a wide variety of audit participants. This is due to many quotations and references that are required for well-founded financial information and the role of audit. It has been said that having a genuine financial and economic data should be the principle assumptions of a society. Being reliable increases confidence in and reliance on financial statements. Some of the aspects of reliability include faithful representation, fitness for purpose, robustness as well as the audit firm reliability.
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1. Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.16, 2013
www.iiste.org
The Impact of Auditor Age on Auditor Independence
A. O. Enofe, C.J. Mgbame, P. O, Okpako,E.N. Atube
Department of Accounting, Faculty of Management Sciences, University of Benin P.M.B. 1154, Benin City,
Edo State, Nigeria.
* E-mail of the corresponding author: voweroh@ymail.com
Abstract
The study investigates the reality of auditor age and auditor independence. The aim of this study is to determine the
relationship between auditor independence and auditor age. The study used primary data. 60 questionnaires were
distributed and 54 questionnaires were retrieved. The data were collected with the help of a well-structured
questionnaire of three sections administered to eight firms in Benin City, Edo State. OLS regression was used in
analyzing explanatory variables like board size, audit risk, professional judgment, auditor’s age, tenure and auditor’s
independence as dependent proxy and the study reveal that auditor independence is significantly influenced by
auditor age.
Keywords: Auditor independence, audit age, audit risk, professional judgment, integrity, tenure
1. Introduction
Current accounting scandals at well-known companies such as Enron, HealthSouth, Tyco, Worldcom, Cadbury, Afri
bank, Oceanic bank and Intercontinental bank has affected the auditing profession. These has allow users of the
financial statement to question auditor independence or the lack thereof. The auditors that audited these companies
had been in existence for a long time. In the wake of these scandals, many of these companies saw their equity
values drop noticeably and experienced a decrease in the credit ratings of their debt issues, often to junk status.
The major responsibility of professional auditors is to increase and maintain the confidence in financial statements
by convincing the users of these statements that they (the auditors) are independence (Quick & Rasmussen, 2009).
Nevertheless, auditor should be independence in appearance and in fact and must reflect this independence in his
opinion. Throughout the audit, the auditor uses a factor that is central to all audit engagement: risk assessment. The
activity of risk assessment is directly linked to the auditor age, auditor’s risk behavior and risk attitude, as well as
professional judgment. The soundness and superiority of the auditor’s professional judgment as well as the auditor
age and auditor independence are important fundamentals which work mutually to strengthen the reputation of the
auditing profession.
1.2 Research Problem
Hua, Georgakopoulos, Sotiropoulos and Galanou (2010) conducted a study to discover the major factors that may
influence auditor independence. The study findings indicated that non-audit service and low-price are not affecting
auditor independence. Effective working regulations that govern the audit profession are vital factor in maintaining
auditor independence. Competition and audit firm size are important aspects of auditor independence, but other
national cultural concerns and political-regulatory aspects have weak effect on audit independence.
A cross-sectional survey was conducted by Adeyemi and Akinniyi (2011) on the opinions of some lecturers of
auditing, practising auditors, stockbrokers, shareholders and managers to identify the main factors that may obstruct
auditor independence. The result showed that amount of audit fee was the most key factor. The results also revealed
that the existing laws and legislations were obsolete and need to be developed according to the current global
business market requirements.
Wang and Hanna (1997) and Bellante and Green (2004) argue that, on the contrary, auditor independence increases
with audit age. Based on this argument, the relationship between auditor age and auditor independence is not
conclusive and that additional work needed to be done in this light the aim of this study is to find out the impact of
auditor age on audit quality.
1.3 Research Questions
From the preceding, the study is expected to answer the following questions:
1)
To what extent does auditor age affect auditor independence?
2)
What impact does auditor age have on the auditor professional judgement?
3)
To what extent does the auditor age impinge on the auditor’s ability to take risk?
1.4 Research Objectives
In the light of the above questions, the main objectives of this study are stated as follows:
1)
Determine the impact of auditor age on auditor’s independence.
2)
Ascertain if auditor age influence auditor professional judgement.
3)
Know if auditor age influences auditor ability to take risk.
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2. Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.16, 2013
www.iiste.org
1.5 Hypotheses
This study will test the following hypotheses:
H01: Auditor age is not related to auditor independence.
H02: Auditor age is not influenced by auditor professional judgement
H03: Auditor age is not related to auditor ability to take risk.
2. Literature Review
2.1 Auditor Independence
Independence is historically and philosophically the base of the public accounting profession. Independence is
fundamental to the reliability of auditors’ reports. The reports would not be credible, and investors and creditors
would have little confidence in them, if auditors were not independent in appearance and in fact. Credibility means
that the auditor’s opinion must be based on a goal and unbiased assessment of whether the financial statements are
presented fairly in compliance with generally accepted accounting principles. Interestingly, the IFAC (2001)
definitions are more comprehensive. Independence of mind is defined as: the state of mind that permits the provision
of an opinion without being affected by influences that compromise professional judgment, allowing an individual to
act with integrity, and exercise objectivity and professional skepticism. Auditor must be independent of the auditee
in both attitude and appearance. Audit function has to be independent of the activity being reviewed to allow
objective completion of the audit assignment; Auditor should be and appear to be independent in attitude and
appearance at all times (ISACA, 2013). Auditor must be organizationally independent of the area being audited.
Independence in appearance is defined by IFAC as: ‘the avoidance of facts and circumstances that are so significant
that a reasonable and informed third party, having knowledge of all relevant information, would reasonably conclude
that a firms, or a member of the assurance team’s integrity, objectivity or professional skepticism had been
compromised.
ISB (2000) develops an independence risk continuum which relates the assessed level of independence risk with the
possibility of compromised activity i.e. lack of independence in fact. Johnstone, Sutton and Warfield (2001) argue
that independence risk is a function of antecedent environmental conditions derived from direct and indirect
incentives in judgment based decisions.
Auditor Independence refers to the auditor’s ability to present his opinion about the reliability of financial statements
truthfully and without bias away from his interest or the pressure of clients (Abu & Ahmad, 2009). Though,
professional auditor characterised by his/her unique skill obtained through a well-education, a commitment to going
concern learning, service to society and profession, a code of ethics, an agreement to adhere by job’s code and
participation in the self-governance and monitoring of the profession (Mansouri, Pirayesh & Salehi, 2009). Wines
(1994) contend that there is a potential for an appearance of auditor independence impairment when several nonaudit services are provided to audit clients. Blay (2005) examined the influence of independence disfiguration and
litigation risk on auditors' behaviour in assessing evidences and subsequent opinion choices. The results of study
indicated that most auditors are face with high independence threats and risks evaluated information were more
likely to suggest and present an unmodified audit report. Hay, Knechel & Li (2006) investigated whether providing
extra non-audit services will weaken independent by testing three relationships. These include; whether there is a
relationship between non-audit fees and audit fees, whether there is a relationship between non-audit fees and audit
report modification or qualification, and finally whether there is a relationship between non-audit fees and
permanence of audit tenure. The results indicated a potential for the impairment of auditor independence in
appearance but no evidence has been found to support the effect on independence of mind.
Li (2009) carried out a study on whether auditors act independently when dealing with larger wealthy clients. The
result of study indicated no relationship between higher fees and the economic dependence of auditors with respect
to their going-concern opinions. Barbadillo, Aguilar & Carrera (2009) investigated the impact of the compulsory
rotation of different audit firms on auditor independence. The results showed that the audit firms’ rotation has no
effect on the auditor independence issuing similar opinions. The results suggested that auditors’ incentives are to
guard and keep their reputation and credibility. It also encouraged them to keep going concern opinions, while
auditors’ incentives to keep current clients did not impact on their opinions in both the mandatory rotation and postmandatory rotation periods. Abu and Ahmad (2009) conducted study on the main factors that influenced the audit
independence. The results revealed that sum of audit fees is the main important factor. This followed by auditor age,
tenure, audit fir size, competition, audit committee and management advisory service respectively.
2.2 Audit risk
The established audit risk model in SAS 300 identifies the overall audit risk. This is defined as the auditor giving ‘an
inappropriate audit opinion on financial statements (APB 1995). Audit risk could be defined as the risk that an
organization will give an inappropriate opinion, and the risk model underpins the concept of audit quality. Audit risk
is the risk of the auditor getting an inaccurate conclusion based upon audit result. While planning and performing the
audit, the auditor must attempt to reduce audit risk to an acceptably low level and meet the audit aims; there is an
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3. Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.16, 2013
www.iiste.org
opposite relationship linking materiality and level of audit risk acceptable to the auditor that is the higher the
materiality level, the lower the acceptability of the audit risk, and vice versa (ISACA, 2013). This enables the auditor
to determine the nature, timing and extent of audit procedures when planning for a specific audit procedure, the
auditor determines the materiality is lower, thereby increasing the audit risk. Audit risk has three key components:
inherent risk, control risk and detection risk. According to Adeniyi (2010) and ISACA (2013) Inherent risk is defined
as ‘the susceptibility of an audit area or a class of transactions to error in a way that could be material, either
individually or in combination with misstatements in other balances or classes irrespective of related internal
controls. They also defined control risk as risk that an error that could occur in an audit area and could be material,
individually or in combination with other errors, will not be prevented or detected and corrected on a timely basis by
the internal control system. They went further in explaining detection risk as the risk the auditor’s substantive
procedures will not detect an error that could be material, individually or in combination with other errors. The
detection risk associated with identifying a lack of disaster recovery plans is ordinarily low, since existence is
verified easily.
Jeppeson (1998) suggests that one effect of the big firms making efforts to differentiate themselves and add value to
audit by adopting the business risk assessment process is that they become more closely identified with the
objectives of management, and they consequently risk compromising their independence. However some counter
balance may be provided as, by using this approach, the auditor acquires a better knowledge and understanding of
the business. Power (2000) continues this argument by suggesting that much greater responsibility for compliance is
being forced onto the company through regulatory initiatives, particularly the developments in corporate governance
requirements and risk management. If the role of the auditor becomes one of involvement in the design of
compliance systems within the company, then independence from the company may become more difficult to
achieve. This issue emerges as one of the factors for which Andersen were criticized in the Waste Management case
(SEC 2001).
Houston ,Peters & Pratt (1999) had auditors assess the audit risk and business risk for a case where specific errors or
irregularities were present, then recommend audit investment and fees. They found that when the likelihood of an
error was high, the fee did not contain a risk premium, whereas when the likelihood of an irregularity was high, the
fee did contain such a premium. This suggests that auditors are sensitive to the need for more investment in auditing
when high risk of fraud is present, although Houston et al. (1999) did not provide evidence on what specific
procedures the auditors would perform to compensate for this risk. Auditors could have the desire to compensate for
identified risks, but not the ability to do so. Some have suggested that an effective way of addressing such risks is to
use fraud specialists.
2.3 Auditor Age
Vroom and Pahl (1971) investigate the age behaviour relationship on a sample of about 1,500 managers with age
ranging from 22 to 60 years. They found that the slope of the relationship between mean riskiness and age is greatest
in the age range 22 to 32 years, flattens out in the age range 33 to 48 years and increases again in the age range 48 to
58 years. This means that for the managers used in the study, the age group 22 to 32 years and 48 to 58 years appears
to be more independence seeking whereas the age group 33 to 48 appears to be less independence. They also find
evidence that the value people place on independence decreases with audit age in a linear relationship. This results
offer evidence that there is a significant relationship between audit age and auditor independence. Morin and Suarez
(1983) carried out a study and concluded that, on average, independence increases with audit age. Kahneman and
Tversky’s (1979) prospect theory - in which age may be a factor that alters the “objective” of independence and
which could represent an alternative theoretical explanation for how age may affect financial decision making.
3. Methodology
The objective of the present research is to answer the research question and identify whether there is a relationship
between auditor’s independence and audit age. Due to time and economic constraints, in answering the research
question, the survey method is selected for the purpose of this study in order to collect a sufficient amount of primary
data. The use of questionnaires is the most widely used data collection technique in a survey and, in this study. The
data collected are analyzed using chi-square statistical software and OLS regression analysis these are employed and
the results will be used to validate or invalidate the hypothesis. The findings will be discussed and conclusions will
be drawn.
4. Result and Discussion
60 questionnaires were distributed and 57 questionnaires were collected including 54 usable questionnaires. This
yields a response rate of 86.67%. The highest level of gender response is male with frequency of 34 and percentage
of 65.38%. The greatest age response is 34-41 and 42-48, frequency is 12 and percentage is 23.08%. The greatest
response from qualification is ICAN with frequency of 18 and percentage of 34.61%. The highest level of
occupation is auditors with frequency of 20 and percentage 34.61%. Table 1 describes the main characteristics of the
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4. Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.16, 2013
www.iiste.org
study respondents.
4.1 Data Analysis
Agbonifoh and Yomere (1999) opine that a good analysis of data gathered forms the bedrock of a successful
project work. Data analysis involves the use of appropriate statistical tools for the nature of data collected.
Therefore, chi-square test OLS regression was used to analyze data generated from questionnaires. Correlation
will be used to analyze the data from the secondary sources in order to establish the relationship between the
different variables.
One factor the regulators are concerned that may impair auditor's independence is long auditor tenure (the length
of the auditor – client relationship). Their concern is that as the auditor tenure gets longer, auditors are more
likely to compromise on their client's accounting and reporting choices in order to retain the client. But there no
much work done on auditor’s age. By our research finding auditors age has significant relation on auditor
independence this is in agreement with Vroom and Pahl (1971). This leads to our second hypothesis (expressed
in alternate form): H1: Auditor independence is positively related to audit age (nine years or more) as compared
with medium auditor tenure (four to eight years).
5. Summary of Findings
Auditors independence has turn out to be one of the most important aspects that focus on the integrity and
quality of an audit that enhances the shareholders confidence. Table of descriptive statistics shows the various
means and standard deviation of the explanatory variables and the independent variable. Furthermore, from our
analysis auditor’s age should not be a single measure of auditors independence and the tendencies to engage in
audit risk we highlighted on other explanatory variables.
Table 1: Descriptive Statistics
Mean
Std. Deviation
N
Auditor independence
30.33
22.004
54
Board size
9.87
3.082
54
Audit fee
10.59323
.897265
54
Auditor risk
12.27
6.034
54
Professional Judgment
.36670
.237816
54
Auditors age
1.2817
2.30523
54
Tenure
11.233
3.1369
54
Integrity
60.5653
26.14177
54
The relevance of auditor age to auditor independence is clearly specified by our ANOVA table with F-value
(1.786) it has a relationship between audit age and auditor independence proxies and its statistically significant.
It was clear that our null H0: For the third hypothesis is to be rejected and accept the alternative hypothesis. In
these findings it is obvious that auditor independence is positively related to auditor ability to take risk in
Accordance to Adeniyi (2010).
Table 2: ANOVA
Model
Sum of Squares
Df
Mean Square
F
Sig.
Regression
5088.019
7
726.860
1.786
.141b
1
Residual
8952.647
22
406.939
Total
14040.667
29
a. Dependent Variable: Auditor independence
Integrity, Auditor age, Board size, Professional Judgment, Audit Risk , Tenure, Integrity b
Auditor independence will further be strengthened as to whether evidence for the often postulated influence of
Auditor age on important outcomes can be valid measurement model for professional judgment and the
validation of identified relations to its antecedents and consequences in taking audit risk.
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5. Research Journal of Finance and Accounting
ISSN 2222-1697 (Paper) ISSN 2222-2847 (Online)
Vol.4, No.16, 2013
www.iiste.org
Table 3: Regression Analysis
Coefficientsa
Model
Unstandardized Coefficients
B
171.807
-.993
-13.006
-.842
Std. Error
76.885
1.787
7.648
.729
Standardized
Coefficients
Beta
T
Sig.
(Constant)
2.235
.036
Board size
-.139
-.556
.584
Audit fee
-.530
-1.700
.103
Auditor risk
-.231
-1.155
.260
1
Professional
-38.968
19.813
-.421
-1.967
.062
Judgment
Auditor age
-4.076
2.003
-.427
-2.035
.054
Tenure
3.470
1.520
.495
2.284
.032
Integrity
-.050
.175
-.060
-.287
.777
a. Dependent Variable: Auditor independence
Audiindp=171.807-.99bosize–13.006audfee-.842audage-38.968profjudg–4.076audrisk+3.470TEN-.050INT
Std. Error
76.885
1.787 7.648 .729 19.813 2.0031 .520
.175
Tval 2.235
-.556
-1.700
-1.155
-1.967
-2.035
2.284
-.287
It is clear by our regression hypothesis that the aims of this study was meant in that auditor age has positive
relationship with auditor’s independence and ability to take risk was brought to focus by our analysis. This was
done by the structural model of our auditor independence having a negative relationship with Auditor age, Board
size, Professional Judgment, Audit Risk, Integrity, with the exception of tenure (0.032) which has a positive
relationship and it is also statistically significant, professional judgment (0.062), auditor age (0.054) is
statistically significant. The hypothesis of the relationship between audit risk and its driver auditor independence
was seen as an internal advantage to detect errors in audit report of firms under review.
6. Discussion of Findings
Consistent with prior literature and throughout our analysis we winsorize the extreme values of the distribution
has read by our R (0.602) which is 60% and R2 (0.362) which is 36% explains the level of the explanatory
variable with auditor independence with a stand error of 20.173. The result is not affected by whether and how
we identify the auditor independence variable. Our results are also not sensitive to MxNichols 200 modification
which adds changes to auditor age estimators as independent variables.
Table 4: Model Summary
Model
R
R Square
Adjusted
R Std. Error of the
Square
Estimate
1
.602a
.362
.159
20.173
a. Predictors: (Constant), Auditor age, Board size, Professional Judgment, Audit Risk
, Tenure, Integrity b
Prior research provides support for tenure (0.032) level of significance as a factor considered by boards of
director in selecting auditors. But there is significance with auditor’s age DeFond and Francis (2005) suggest the
analysis of audit reporting behavior at the level of the individual partners who could be the ultimate decision
makers in issuing audit reports to clients. Based on prior research which argues that audit tenure-ship had
significant relationship with auditor’s independence is likely to play a smaller role in contract enforcement as the
agent gets older (age displayed in this context). DeAngelo's definition is the market-assessed probabilities, that
is, it hinges on the market's perception as to whether a given auditor will perform the audit competently and the
perceived degree of auditor independence DeAngelo (1981), we also examine the sensitivity of our results to
eminent professional judgment to specifically we redefine the variable auditor age to be equal to 25-65years of
age or older, and zero otherwise. The result of this test shows that the coefficient on auditor’s age is not
significantly different from zero. It shows that there are so many cases where auditor age does affect the
professional judgment, integrity and risk. To keep empirically modeling simple, we treat auditor’s integrity (0.067) as variable for purpose of this test. By the analysis it is obvious that often time there is a significance
relation between auditor independence and audit age. By our findings we also examine the effect of the auditor
age has significant influence on professional judgment.
The chi-square statistical test also attests to the conclusion that our null hypothesis is to be accept the alternative
hypothesis.
67
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7. Conclusion
Auditor independence has been a major concern for a long time. In recent times, it has become more
pronounced, given the collapse of Enron, which resulted in the closure of Arthur Andersen, one of the major
international accounting firms Vinten, (2003). Auditor independence has been defined as the ability to resist
client pressure Knapp, (1985). Similarly, Independence Standards Board (ISB) (2000) defined auditor
independence as the: . . . freedom from those pressures and other factors that compromise, or can reasonably be
expected to compromise an auditors’ ability to realize unbiased audit decisions. Auditor independence has been
assessed based on two standards, that is, fact and appearance. Independence in fact refers to the actual objective
state of the relationship between auditing firms and their clients. Independence in appearance refers to the
subjective state of that relationship as perceived by clients and third parties see auditor independence was
perceived to be enhanced by the existence of audit committees, rotation of audit partners, risks to auditor arising
from poor quality, regulatory rights and requirements surrounding auditor change and an auditor’s right to attend
and be heard at the company’s annual general meetings. To date, research has been done in many countries,
including Lindsay (1992) in Canada, Gul (1989) in New Zealand, Teoh and Lim (1996) in Malaysia, Beattie et
al. (1999) and Firth (1980) in the UK, Hudaib (2003) in Saudi Arabia and Bartlett (1993) in the USA, to name a
few. Interestingly, most studies have focused on identifying the factors that form a potential threat to auditor
independence in appearance. However, little attention has been paid to the factors that enhance auditor’s age.
From our finding auditor independence has strong significant relationship with auditor’s age, professional
judgment, and audit tenure but has a weak significant relationship with board size, audit fee and audit risk. The
implication of this is that the auditor’s age does not impair on his independence. An auditor who has bagged a
professional qualification can discharge official duties and the duties of care at any age. For an auditor to be
effective he must possess certain characteristics, which can be classified into personal and professional qualities.
The personal characteristics include an analytical mind which develop progressively with age and experience,
patience, diligence, good interactive skills and an understanding of human behavior.
Auditor age is positively related to auditor’s ability to take risk, this contradict our null hypothesis. Auditor
independence comprises of three distinguishable phases namely professional independence, audit independence
and perceived independence. Professional independence requires the auditor deriving from self-imposed
standards and peer-group 'surveillance, to be free from control or influence of management. Audit independence
implies the freedom of prejudice on the part of the auditor in performing the audit functions, ensuring objectivity
in forming delicate judgment or opinions. Perceived independence involves the perception of the public on the
independence of the auditors and the entire profession.
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Vol.4, No.16, 2013
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Appendix
Regression
Descriptive Statistics
Auditor independence
Board size
Audit fee
Auditor Age
Professional Judgment
Audit Risk
Tenure
Integrity
Mean
30.33
9.87
10.59323
12.27
.36670
1.2817
11.233
60.5653
Std. Deviation
22.004
3.082
.897265
6.034
.237816
2.30523
3.1369
26.14177
N
30
30
30
30
30
30
30
30
Variables Entered/Removeda
Model
Variables Entered Variables
Method
Removed
Integrity, Auditor
age, Board size,
Profession
1
.
Enter
Judgment, Audit
Risk , Tenure,
Integrity b
a. Dependent Variable: Auditor independence
b. All requested variables entered.
Model Summary
Model
R
R Square
Adjusted R Square Std. Error of the
Estimate
1
.602a
.362
.159
20.173
Integrity, Auditor age, Board size, Profession Judgment, Audit Risk , Tenure,
Integrity b
ANOVAa
Model
Sum of Squares
Df
Mean Square
F
Regression
5088.019
7
726.860
1.786
1
Residual
8952.647
22
406.939
Total
14040.667
29
a. Dependent Variable: Auditor independence
Integrity, Auditor age, Board size, Profession Judgment, Audit Risk , Tenure, Integrity b
Coefficientsa
Model
Unstandardized Coefficients
Standardized
T
Coefficients
B
Std. Error
Beta
(Constant)
171.807
76.885
2.235
Board size
-.993
1.787
-.139
-.556
Audit fee
-13.006
7.648
-.530
-1.700
Audit risk
-.842
.729
-.231
-1.155
1
Professional
-38.968
19.813
-.421
-1.967
Judgment
Auditor age
-4.076
2.003
-.427
-2.035
Tenure
3.470
1.520
.495
2.284
Integrity
-.050
.175
-.060
-.287
70
Sig.
.141b
Sig.
.036
.584
.103
.260
.062
.054
.032
.777
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Vol.4, No.16, 2013
a.
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Dependent Variable: Auditor independence
71
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Vol.4, No.16, 2013
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Table 1. Background information of the respondent
Gender
Male
Female
Total
Frequency
36
18
54
%
63.38
34.62
100
Age Group
18-25
26-33
34-41
42-48
49-56
Others
Total
8
10
13
13
6
4
54
15.38
19.23
23.08
23.08
11.54
7.69
100
Qualification
BSc
MBA
MSc
ICAN
ANAN
Total
6
10
13
19
6
54
11.52
19.23
23.08
34.61
11.54
100
Occupation
Civil Servants
Accountants
Auditors
Lecturers
Total
15
15
20
4
54
26.29
26.29
34.46
7.69
100
72
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