Auditor Independence and Audit Quality

TLDR

This article reviews academic research on auditor independence and audit quality. The review analyzes articles from 1976–2013 in nine leading auditing journals, focusing on four threats—client importance, non‑audit services, auditor tenure, and client affiliation—to assess their impact on auditor incentives, perceptions, behaviors, and audit quality. The authors find mixed evidence and, given recent regulatory changes, identify opportunities for future research on auditor independence and audit quality.

Abstract

This article presents a comprehensive review of academic research pertaining to auditor independence and audit quality. This literature review is conducted based on published articles during the period 1976-2013 in nine leading journals related to auditing. We organize our review around four main threats to auditor independence, namely, (a) client importance, (b) non-audit services, (c) auditor tenure, and (d) client affiliation with audit firms. For each of the threats, we discuss findings related to the incentives, perceptions, and behaviors of the auditor and the client, as well as the effects of each threat on the actual and perceived quality of audits and financial reports. We conclude that the mixed evidence, together with recent regulatory changes, provides opportunities for future research on auditor independence and audit quality.