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Dissertation/Thesis Abstract

Is Financial Reporting and Audit Quality Lower when Auditors Lack Independence
by Robinson, Ranier M., Ph.D., The University of Alabama, 2020, 100; 28029145
Abstract (Summary)

The Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) are concerned about circumstances that threaten auditor independence based on their belief that auditor independence is essential to the efficiency of capital markets. The relationship between auditor independence and financial reporting and audit quality, have been difficult to establish because the extent of auditor independence is unobservable. Prior research has relied on proxies for auditor independence, and overall the results provided by this research are mixed. In this study, I utilize a sample of firms that switch auditors retrospectively to avoid further violation of SEC independence rules—as a more direct measure of auditor independence. Using propensity score matching and a difference-in-differences research design, I find evidence that independence violations are associated with impaired financial reporting and audit quality. Further, I find improvements in both financial reporting and audit quality subsequent to an auditor switch for independence violation firms relative to non-independence issue control firms. Overall, these results provide justification for regulators’ concerns about the potential negative consequences of a lack of auditor independence on financial reporting quality and audit quality.

Indexing (document details)
Advisor: Lopez, Thomas J.
Commitee: Barrett, Bruce E., Mobbs, Shawn, Pollard, Troy J., Stone, Mary S.
School: The University of Alabama
Department: Accounting
School Location: United States -- Alabama
Source: DAI-A 82/9(E), Dissertation Abstracts International
Source Type: DISSERTATION
Subjects: Accounting, Public policy, Public administration, Finance
Keywords: Audit quality, Financial reporting, Restatements, Auditor independence, SEC independence rules
Publication Number: 28029145
ISBN: 9798582556060
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