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The effect of a transparency report on auditor independence: practitioners’ self-assessment

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Abstract

The objective of this study is to investigate how practitioners assess several aspects of a transparency report on auditor independence published by auditing firms. This research was conducted using a survey approach with an experimental component, where the research instrument was distributed to 92 experienced practitioners. Results indicate no significant perceived difference as to whether the transparency report is mandatory or voluntary or whether the report is audited or not. Also the transparency report’s effectiveness is not assessed differently by practicing auditors or accountants. Further descriptive analysis over the full sample indicates the individually most important safeguards related to auditor independence are perceived to be quality assurance, internal quality controls and independence practice and compliance. However, the importance of fee information and information on audited entities is assessed to be more important by accountants compared to auditors due to different interests.

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Notes

  1. The Professional Oversight Board of the UK launches consultation on statutory transparency reporting by auditors of public interest entities (http://asb.co.uk/pob/press/pub1162.html).

  2. Biases can arise from a sample, which does not represent the participant population. Representativeness expresses the degree to which sample data accurately and precisely represents a characteristic of a population’s parameter variations at a sampling point. If the sample is representative in some important target variables, then we have increased confidence in the validity of the sample to represent the target population. We conduct Chi-Square tests on the sample variables “knowledge” and “experience”, which tests whether the frequency distribution of these target variables observed in the sample is consistent with the particular theoretical distribution, since data on the whole population is missing. Results indicate an equal distribution for “knowledge” (χ 2 = 86.747) and “experience” (χ 2 = 40.615).

  3. A Chi-square test was used to assess response bias. The probability of observing the observed difference if responding subjects are different from non-respondents is approximately χ² = 34.801. This probability is lower than conventional criteria for statistical significance, so we can conclude that respondents and non-respondents are not significantly different.

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Pott, C., Mock, T.J. & Watrin, C. The effect of a transparency report on auditor independence: practitioners’ self-assessment. Rev Manage Sci 2, 111–127 (2008). https://doi.org/10.1007/s11846-008-0017-y

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