Does Opinion Shopping Impair Auditor Independence and Audit Quality?
Audit Theory
Written Essay Assignment
Does Opinion Shopping Impair Auditor Independence and Audit Quality?
by:
Tong Lu
Journal of Accounting Research, Vol. 44, No.3 (Jun., 2006), pp.561-583
Additional articles:
Ghosh, A., Moon, D., (2005). Auditor Tenure and Perceptions of Audit Quality. The Accounting Review, Vol. 80(2), pp.585-612.
Myers, J. N., Myers, L. A., Omer, T. C., (2003). Exploring the Term of the Auditor-Client Relationship and the Quality of Earnings: Case for Mandatory Auditor Rotation? The Accounting Review, Vol. 78(3), pp.779-799.
1. Summary
In accounting as a scientific discipline there are three major specialty areas namely, financial accounting, management accounting and auditing. The article, which I will discuss in this essay, belongs to the auditing and financial accounting discipline and focuses on the independency of auditors and the quality of audit (reports). A lot have been written and there has been a lot of discussion yet about this subject, on which Tong Lu builds further in his article: ‘Does Opinion Shopping Impair Auditor Independence and Audit Quality?’ He tries to find and answer to the question whether the independence of auditors and the quality of audit (reports) are threatened by a certain practice, called opinion shopping. Lu describes this practice as ‘the involvement of the search for an auditor willing to support a proposed accounting treatment designed to help a company achieve its reporting objectives even though that treatment might frustrate reliable reporting’ (SEC (1988)).
In approaching the research question he focuses on auditor switching, which in some cases is driven by opinion shopping. According to Lu this focus is because of two issues: audit quality and auditor independence. The former refers to the probability that the auditor will detect misstatements and the latter refers to the probability that the auditor will refuse
Written Essay Assignment
Does Opinion Shopping Impair Auditor Independence and Audit Quality?
by:
Tong Lu
Journal of Accounting Research, Vol. 44, No.3 (Jun., 2006), pp.561-583
Additional articles:
Ghosh, A., Moon, D., (2005). Auditor Tenure and Perceptions of Audit Quality. The Accounting Review, Vol. 80(2), pp.585-612.
Myers, J. N., Myers, L. A., Omer, T. C., (2003). Exploring the Term of the Auditor-Client Relationship and the Quality of Earnings: Case for Mandatory Auditor Rotation? The Accounting Review, Vol. 78(3), pp.779-799.
1. Summary
In accounting as a scientific discipline there are three major specialty areas namely, financial accounting, management accounting and auditing. The article, which I will discuss in this essay, belongs to the auditing and financial accounting discipline and focuses on the independency of auditors and the quality of audit (reports). A lot have been written and there has been a lot of discussion yet about this subject, on which Tong Lu builds further in his article: ‘Does Opinion Shopping Impair Auditor Independence and Audit Quality?’ He tries to find and answer to the question whether the independence of auditors and the quality of audit (reports) are threatened by a certain practice, called opinion shopping. Lu describes this practice as ‘the involvement of the search for an auditor willing to support a proposed accounting treatment designed to help a company achieve its reporting objectives even though that treatment might frustrate reliable reporting’ (SEC (1988)).
In approaching the research question he focuses on auditor switching, which in some cases is driven by opinion shopping. According to Lu this focus is because of two issues: audit quality and auditor independence. The former refers to the probability that the auditor will detect misstatements and the latter refers to the probability that the auditor will refuse