Antecedents Which Influence The Auditors Independence Accounting Essay

This survey aims to place the ancestors which influence the hearers ‘ independency ( AI ) on clients ‘ perceptual experience. This chapter starts with a brief background which consists of basic definitions on the subject and follows up with the motivation to carry on this survey. Some issues of AI affecting the populace listed companies every bit good as Small and Medium Enterprises ( SMEs ) were raised out to back up the intent to carry on this survey. Subsequently, research inquiries and research aims were identified to contract down and ease this survey.

Research Background

Professional hearers are required to show on the clients ‘ fiscal statement prepared by the direction as to whether they present true and just position with conformity to the International Standard on Auditing ( ISA ) ( Alleyne, Devonish, & A ; Alleyne, 2006 ) . Therefore, cardinal rule of hearers is to be independent in showing credibleness and dependability of fiscal information for client and related users ( McGrath, Siegel, Glazer, Dunfee, & A ; Jeanicke, 2001 ) .

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Harmonizing to Olagunju ( 2011 ) , there is no specific intending property to AI. However, some referred it as the hearer ‘s province of head and ability to prolong behavioural attitude in be aftering audit plan, readying of fiscal study and public presentation in verifying work ( Bakar & A ; Ahmad, 2009 ; Jaffar, Selamat, & A ; Ismail, 2003 ) . AI is besides perceived as the basis of the scrutinizing profession which is critical in the statutory corporate coverage ( Ping, Carson, & A ; Simnett, 2006 ) . This is because AI is the foundation for the populace ‘s trust in the attest map of fiscal coverage ( Lindberg & A ; Back, 2004 ) . However, public assurance towards AI has been eroded since the Enron ‘s instance ( Abdullah & A ; Mohd. Nasir, 2004 ; Pinging et al. , 2006 ) . Meanwhile, even when hearers act independently, certain factors might impact the perceptual experience of the public towards AI ( Lindberg & A ; Back, 2004 ) .

Limited surveies have been carried out in Malaysia on analyzing AI ( Bakar, Abdul Rahman, & A ; Abdul Rashid, 2005 ; Bakar & A ; Ahmad, 2009 ) . Hence, the intent of this drawn-out research is to research and find the ancestors that affect AI from SMEs perceptual experience. SMEs in Malaysia history for 99.2 per centum of entire constitutions which form a anchor of industrial growing and economic of Malaysia ( Aris, 2006 ) . SME is determined based on the figure of full-time employees or one-year gross revenues turnover ( United Nations Development Programme Malaysia, 2007 ) . Fabrication, manufacturing-related service and agro footing with non transcending 150 employees or 25 million one-year gross revenues turnovers is regard as SME. Services, primary agribusiness and information, and communicating engineering with non more than 50 employees or 5 million one-year gross revenues turnover is regard as SME.

Problem Statement

AI issue has became terrible and violent ponder among the users of fiscal statement ( Abdullah, 2005 ) . The bankruptcy of Enron and WorldCom had created consciousness to be cautious with inaccurate fiscal coverage procedure and audited fiscal statements. Therefore, AI issue has reached a high degree ( CernuAYca & A ; Dima, 2007 ; Porter & A ; Gowthorpe, 2004 ) . Issue between struggle of involvements and AI has been raised in Transmile Group Bhd. Norwani, Mohamad, and Chek ( 2011 ) stressed out that answerability of hearers is indispensable to bring forth dependable fiscal studies.

Warfield ( 2011 ) discovered 31 SMEs bookkeeping fraud instances in Queensland and concluded that, fraud instances in SMEs ‘ caused the organisation to shut its concern, go forthing guiltless victims, such as creditors out of pocket and employees out of a occupation as they do non hold big economic resources to retrieve.

Welch and Priddy ( 2010 ) concluded that independent and funny appraisal of a concern will add value to SMEs as they emerge from the economic downswing. Therefore, this research will be concentrating more on SMEs ‘ perceptual experience.

Bakar and Ahmad ( 2009 ) studied on size of audit fees, size of the audit houses, audit term of office ( AT ) , being of audit commission, being of competition and NAS from Malayan comptrollers ‘ position. They concluded that larger size of audit house and being of audit commission enhances AI while the other factors devalue the AI.

Sori, Ramadili, and Karbhari ( 2009 ) did the research on the function of audit commission ( AC ) from Malayan banker ‘s position. They concluded the AC could well support AI if members are purely independent. Similar to Sarkar and Sarkar ( 2010 ) , the research was done in India ‘s big listed companies. The grounds showed betterment of powers, maps and the independency of the AC will reenforce AI.

Habib and Islam ( 2007 ) examined the determiners and effects of non-audit services fees ( NASF ) in Bangladesh. Their topics were the hearers from a non-litigious environment and NASF are negatively related to AI. Similar to Defond, Raghunandan, and Subramanyam ( 2002 ) , their research was done in USA. They found no relationship between the NASF and AI. Furthermore, Gul, Jaggi, and Krishnan ( 2007 ) mentioned AI may be compromised as a consequence of high NASF for smaller size of clients ‘ house.

Previously, most researches were done on abroad state ( Defond et al. , 2002 ; Habib & A ; Islam, 2007 ; Sarkar & A ; Sarkar, 2010 ) . Even if it was done in Malaysia, those researches were on public listed companies ( Sori & A ; Ramadili, 2007 ) and single clients, such as bankers and investors ‘ perceptual experience ( Bakar & A ; Ahmad, 2009 ; Salehi, Mansoury, & A ; Azary, 2009, Sori et al. , 2009 ) . Less AI researches were done on SMEs ‘ perceptual experiences. Besides, separation of ownership and direction ( SOM ) has small empirical surveies done ( Bakar & A ; Ahmad, 2009 ) , while the AT and NASF have different positions ( Alleyne et al. , 2006 ; Gul et al. , 2007 ; Habib & A ; Islam, 2007 ) . Therefore, it is better to retest the variable in order to acquire an improved position.

Research Questions and Aims

This research is carried out to place the ancestors that influence the AI, chiefly concentrating in Malayan SMEs.

Table 1.01: Research Questions and Aims

Research Question

Research Objective

General Research Question

General Research Objective

What are the ancestors which influence the hearers ‘ independency?

To look into the ancestors those influence the hearers ‘ independency.

Specific Research Questions

Specific Research Aims

Is there a important relationship between the function of audit commission and the hearers ‘ independency?

To find the important relationship between the function of audit commission and hearers ‘ independency.

Is there a important relationship between the audit term of office and hearers ‘ independency?

To find the important relationship between the audit term of office and hearers ‘ independency.

Is there a important relationship between non-audit services fees and hearers ‘ independency?

To find the important relationship between non-audit services fees and the hearers ‘ independency.

Is there a important relationship between the separation of ownership and direction and the hearers ‘ independency?

To find the important relationship between the separation of ownership and direction and hearers ‘ independency.

Beginning: Developed for the research

1.4 Significance of the Study

1.4.1 Practical Contribution

This research is designed to measure the independent variables ( IV ) which provide penetrations for animating and steering future actions of the terminal users of fiscal statement. Specifically, it provides deeper cognition and understanding on cardinal constituents and ancestors of AI every bit good as additions the assurance in fiscal coverage of the scrutinizing profession. Besides, it besides educates the auditing house and scrutinizing profession by supplying way, heightening the professional guidelines and avoiding the same state of affairss that will sabotage AI. Auditing profession may construction or beef up their policies and model which related to AI.

1.4.2 Theoretical Contribution

Furthermore, this analysis and consequences will be helpful particularly to the hereafter researches and literature as it can function as future mentions and heighten the research on the determiners of AI. Future research workers may besides do usage and reference those cardinal elements on AI every bit good as support keeping the AI and audit quality. Last, this research theoretical account is an drawn-out theoretical account: Evidence on the Joint Effectss of Auditor Tenure and Non-audit Fees ( Gul et al. , 2007 ) ; Audit Committee Authority and Effectiveness: The Percepts of Malaysia Senior Managers ( Sori, Hamid, Saad, & A ; Evans, 2007 ) and Ownership Rules of Audit Firms and Their Consequences for Audit Market Concentration ( Oxera Consulting Ltd, 2007 ) which attempt to analyze these ancestors to be a more holistic theoretical account.

Chapter Layout

The survey consists of five chapters. Chapter one discusses the background of survey, job statement, research inquiries and aims, and the significance of the survey. Chapter two focal points on the literature reappraisal where the theoretical foundation and the reappraisal of anterior empirical surveies will be discussed farther. Subsequently, the research theoretical account and the hypothesis development will besides be presented. Chapter three demonstrates the research methodological analysis with the research design, informations aggregation methods, population and sampling processs. Research instrument, concepts measuring, informations processing and information analysis will besides be explained. Last, chapter four nowadayss informations analysis and chapter five shows the treatment, deductions and decision of the survey.

1.6 Decision

This chapter will assist research workers to hold a unsmooth apprehension about the relationship between the IVs and dependent variable ( DV ) . This survey besides contributes to the readers where the parts were narrowed down into two position ; practical perceptual experience and theoretical perceptual experience. The following chapter will be stressing on the literature reappraisal refering the issue of AI.


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