Assessing the appearance of auditor independence using behavioral research methodology

Abstract

Recent archival studies have examined the association between auditor independence and non-audit services. The results of these studies suggest that fees for non-audit services are not associated with indicators of auditor independence in fact whereas these fees are associated with financial statement users' perceptions of auditor independence (i.e., independence in appearance). The present study attempts to reconcile these conflicting findings by using a behavioral research methodology that provides greater control over the independent variables and measures more directly financial statement users' perceptions. Our results indicate that fees for financial information systems development services do not affect perceptions of auditor independence, whereas, fees for tax services adversely affect perceptions of independence. Overall, the results provide mixed support for the recent Securities and Exchange Commission policy changes on auditor independence.