The Impact of Audit Firm Size and Audit Committees on Perceptions of Auditor Independence and Financial Statement Reliability in Ireland

Abstract

This study reports the results of an investigation of the effects of audit firm size and audit committees on perceptions of auditor independence held by corporate lenders, investment managers and financial analysts in Ireland. The study methodology combined the use of mail questionnaire and semi-structured interviews to allow both breadth of coverage and the opportunity to probe deeper into the nature of the perceptions held. The principal findings of the study were that perceptions of auditor independence were enhanced if the auditor was a member of the Big Six and also if the client had established an audit committee. Although these results were not in themselves unexpected, analysis of the interviews provided further insights into how users of financial statements formed these perceptions and also highlighted a significant minority concern as to the independence and efficacy of non-executive directors serving on audit committees in Ireland.