Auditor Independence And Non Audit Services A Literature Review
Auditor Independence and Non-Audit Services:
A Literature Review
Vivien Beattie
University of Stirling and Stella Fearnley
University of Portsmouth
TABLE OF CONTENTS
Page
List of tables and list of figures
About the authors
v vi List of abbreviations
vii
Executive summary
ix
Part 1
Auditor independence
1
Introduction
2
1
1.1
The role of audit in regulating capital markets
1
1.2
The ‘problem’ of non-audit services (NAS)
1
1.3
The current UK regulatory and professional environment
2
1.4
Motivation for this study
3
1.5
Structure of report
3
Auditor independence
4
2.1
Introduction
4
2.2
Definitions of auditor independence
4
2.3
Economic models of auditor independence not including NAS
5
2.4
Models of auditor pricing and independence in the presence of NAS
5
2.5
2.6
Economic power models of auditor independence
Moral psychology, ethical reasoning and independence
8
8
2.7
Broader based studies into auditor decision making
9
2.8
Summary and comments
11
Part 2
Current regulatory frameworks
3
Auditor independence and NAS: analysis of current regulatory frameworks 3.1 Introduction
13
3.2
Regulation of auditor independence
13
3.3
Independence in professional and legal regulatory frameworks
13
3.4
3.5
Independence and NAS
Overall economic dependence
19
22
3.6
Small companies
22
3.7
Summary and comments
23
Part 3
Empirical studies of NAS
4
Methods
5
13
25
4.1
Literature search procedures adopted
25
4.2
Review procedures adopted and classification of empirical studies
26
Descriptive studies of the nature and magnitude of NAS fees
5.1 Introduction
28
28
5.2
US studies
28
5.3
5.4
UK studies
Summary and comments
28
30
iii
6
7
8
9
10
Determinants of the NAS purchase decision
6.1 Introduction
31
31
6.2
Empirical studies
31
6.3
Summary and comments
33
Impact of joint provision and joint provision disclosures on auditor independence perceptions and decisions: survey and experimental
A Literature Review
Vivien Beattie
University of Stirling and Stella Fearnley
University of Portsmouth
TABLE OF CONTENTS
Page
List of tables and list of figures
About the authors
v vi List of abbreviations
vii
Executive summary
ix
Part 1
Auditor independence
1
Introduction
2
1
1.1
The role of audit in regulating capital markets
1
1.2
The ‘problem’ of non-audit services (NAS)
1
1.3
The current UK regulatory and professional environment
2
1.4
Motivation for this study
3
1.5
Structure of report
3
Auditor independence
4
2.1
Introduction
4
2.2
Definitions of auditor independence
4
2.3
Economic models of auditor independence not including NAS
5
2.4
Models of auditor pricing and independence in the presence of NAS
5
2.5
2.6
Economic power models of auditor independence
Moral psychology, ethical reasoning and independence
8
8
2.7
Broader based studies into auditor decision making
9
2.8
Summary and comments
11
Part 2
Current regulatory frameworks
3
Auditor independence and NAS: analysis of current regulatory frameworks 3.1 Introduction
13
3.2
Regulation of auditor independence
13
3.3
Independence in professional and legal regulatory frameworks
13
3.4
3.5
Independence and NAS
Overall economic dependence
19
22
3.6
Small companies
22
3.7
Summary and comments
23
Part 3
Empirical studies of NAS
4
Methods
5
13
25
4.1
Literature search procedures adopted
25
4.2
Review procedures adopted and classification of empirical studies
26
Descriptive studies of the nature and magnitude of NAS fees
5.1 Introduction
28
28
5.2
US studies
28
5.3
5.4
UK studies
Summary and comments
28
30
iii
6
7
8
9
10
Determinants of the NAS purchase decision
6.1 Introduction
31
31
6.2
Empirical studies
31
6.3
Summary and comments
33
Impact of joint provision and joint provision disclosures on auditor independence perceptions and decisions: survey and experimental