the importance of audit independence within the public accounting sector
Nowadays Ethical problems in accounting are very important issues during the last 5 to 10 years. Accounting scandals are destroying the confidence and respect of people that resulted in a great criticism not only businesses but also accounting community .The mostly discussed questions that investigated by the different factors affects to increase or decrease of audit Quality. The audit independence is a burning issue for the public accounting profession.
The audit Quality and independence has long been recognized as the soul of the public audit profession. Society gives privilege and power to the audit profession. Auditors are responsible to perform their duties in the best benefit of the public. As a moral aspect of the auditor’s perspective, auditors are professionals, with professional responsibilities to the public. They should try to not engage in any activity that damage their repute as professionals, despite their incentives. Professionals are assuming to perform their professional duties, not for their best interests.
Besides this, there are many external factors affecting the market for audit services and the nature of the audit environment, in particular the need to retain customers, impose conflicting incentives to auditors that could affect his trial to evaluate audit evidence. For example, the need to retain customers than any auditors to compromise the independence of audit by an auditor does not report a false financial statement of the client or the probability of accepting the client's accounting treatment proposed. Similarly, knowledge spillovers in the common commitment to audit and non-audit services, refers to the possibility of a consistent bias in the review and relying on the audit work of previous years. That's an economic perspective focus
. This research is a principle described as follows. First, relevant reviews literature on audit independence, audit quality, are addressed. intrinsic concentration ethics, extrinsic stimulation and professional supervision are also discussed. Second, the research model of relationships is presented and the main hypotheses are developed and described. Thirdly, the research methods used to test these hypotheses are explained and justified in detail. Fourth, the results and analysis of the effects of audit independence, quality and reputation and credibility in the sustainable success and the intrinsic concentration relations ethics, extrinsic incentives, and professional supervision are . Finally, the conclusions of the findings and their implications for theory and management, including guidelines and suggestions for future research, including highlighted
2. LITERATURE REVIEW
Figure 1 illustrates the relationship between audit independence, audit quality, audit credibility, reputation and sustainable success. Similarly, the effects of intrinsic concentration ethics and extrinsic stimuli on the independence of audit using the professional supervision of a moderator included. All relationships are hypothesized to have a positive sense, except, extrinsic stimulation is hypothesized to have a negative sense. Therefore, linking conceptual and research model presents the above relationships and the development of hypotheses are explained and justified in detail.
A Quality Audit Quality audit is defined as the probability of an auditor to detect and report errors as material truth, misrepresentation or omission of material financial statement of the client (DeAngelo, 1981). Audit quality has been defined in many ways. Some of the most common definitions of audit quality are: (1) the probability that an auditor is much to discover and accurately report material misstatements, misrepresentation or omission of material to the financial statements (DeAngelo, 1981) that an auditor no, (2) the chance to give an unqualified report of the inaccurate statements (Lee et al. , 1999), (3) the accuracy of the information the auditor
Hypothesis 1: The control of the high reliability of auditors, audit quality will be more likely. Hypothesis 2: Quality of greater control, more likely to have a high reputation auditor.
2. 2 Audit Independence
Audit Independence is defined as the mental attitude of an impartial auditor in the audit THROUGHOUT Making Decisions and Financial Information (Bartlett, 1993). The attribute of Independence is a very Specialized Auditors. Trying to Maintain the Highest standard of ethics for the accounting profession, Independence referees to the quality of Being free from Influence, persuasion, or bias (Maury, 2000). In Addition, the independent auditor is Expected to Be unbiased in relation to the client under audit and Must Be Present to Be the target of Those Who Depend on the results of the audit (Maury, 2000). Similarly, the Independence of the auditor referees to the Ability of Auditors to Maintain an Objective and impartial attitude of mind-through auditing (Sridharan et al. , 2002). A Lack of Independence, the value of audit services Will Be Greatly affected (Sweeney, 1992) and, in turn, if not is an independent auditor, this Increase the Probability That Is Perceived as less Objective and THEREFORE less likely to report a discovered Breach (Lowe and Pany, 1995). The Commitment to the Independence of the results in a lower level of audit quality That Are Provided in the Financial Statements (Baber et al. , 1995). In Other Words, Not if the auditor is independent, the incentive to audit quality weakens, as errors Are Not Reported Even Though it is (Pike, 2003). Been Studied little direct in Independence Measures Perceived auditor and audit quality (Raynomd, 2005). This research uses direct Measures of perception of Them. Auditor Independence and Helps Ensure Quality Audits Contribute to users financial dependence assurance statement based on auditor independence than their relationship with the credibility of the auditor. In the result, the strength of the auditor's independence also increases the credibility of the auditor (Dopuch et al. , 2003). And, therefore, leads to the hypothesis as follows:
Hypothesis 3 : The greater the independence of audit, it is more likely that auditors will have higher audit quality.
The reputation is defined as a perception of a past performance auditor on audit quality and to carry out the professional standards that customers and the public favor (MacMillan et al. , 2004). The reputation has been evaluated in the above definitions in terms of relative position or convenience (Shrum and Wuthnow, 1988), quality (Podolny, 1993) estimates (at Dolligner et al. , 1997) and favorability (Deephouse, 2000). Ranft et al (2006) suggested that it is a perception shared by other attributes of a person or their behavior.
Hypothesis 4: The higher the reputation, the more likely that auditors will be more successful sustainable quality audit.
professional commitment is defined as individuals form attachments to their profession. It states the following: (1) belief, and acceptance of objectives and professional values, (2) the willingness to exert considerable effort on behalf of the profession, and (3) a strong desire to maintain professional affiliation ( by Aranya et al. , 1981). In general, society expects professionals to be more committed to their profession than to their personal benefit. All stakeholders expect the CPA to maintain public confidence to remain independent of the client and objectively review the financial situation of the company's annual report. Therefore, the independence of audit is the behavior of the child protection ethics should not be neglected (Greenfield et al. , 2007). As discussed in the review of previous studies, professional commitment may be a factor influencing an individual's behavior (Greenfield et al. , 2007). Ethical behavior has a positive impact on professional commitment and ethical orientation for auditors affects their level of professional commitment (Jeffrey and Weatherholt, 1996), therefore, greater professional commitment is reflected in a greater sensitivity to issues related to professional ethics (Yetman, 1995). Audit independence is a professional ethics for auditors should be made by reason of the acceptance of the objectives of the profession and the value. Auditors desire to maintain membership in the profession provides more professional commitment is more likely that the higher to maintain the independence of the audit. The more likely that the commitment to protect children from teachers positively affects the independence of the audit. And, therefore, leads to the following hypothesis:
Hypothesis 5: The higher the professional commitment is more likely that auditors will have greater independence of the audit..
Economic dependence is defined as a bilateral monopoly of audit-client relationship creates an incentive for auditors to compromise their independence to retain clients (DeAngelo, 1981) which describes the auditor's financial dependence on customers as a built-in anti-independence factor (Mautz and Sharaf, 1961). Such increases in economic dependency ratio the client firm size, as larger customers generate higher fees. These rates increased to increase the concern that auditors may compromise their independence in auditing larger (Cahan et al. , 2008). Economic dependence is a significant threat impact factor in the independent perception U. K. evidence (Beattie et al. , 1999). However, the commitment to auditor independence is not always required as a result of increased economic dependence on the auditor. Child protection is likely to maintain their independence if they need to protect reputation (Reynolds and Francis, 2001). If the regulator operates serious monitoring and frequency of punishment, auditors are likely to meet professional standards (Falk et al. , 1999). In addition, auditors can preserve their independence and whether the expected costs of an audit failure is higher than expected costs of losing an audit client is likely (Chaney et al. , 2003). In addition, some studies found no evidence of economic dependence that may cause auditors to compromise their independence (Reynolds and Francis, 2001, Craswell et al. , 2002, Hunt and Lulseged, 2007). Empirical studies to date lead to inconclusive and sometimes contradictory finding regarding the effect of economic dependence on the independence of the audit. This dependence of the interests of economic research as extrinsic stimuli auditor independence decline, therefore, this context refers to the negative association between economic dependence and independence of the audit. And, therefore, leads to the following
hypothesis:Hypothesis 6: The greater the economic dependence is more likely that auditors are less independent of the audit.
2.6 Professional Oversight
professional supervision is defined as the rigor of regulators in setting standards, rigorous enforcement mechanism, the effectiveness of the guidance provided by authoritative accounting and auditing standard, code of conduct and the sanction imposed for violation of ethics. The existence and general guidance, regulations, penalties and the requirement of the audit profession, helps maintain the independence of the auditor. If auditors follow the rules of a code of ethics, his appreciation for the values of the profession increases, it is more likely to increase audit independence (Greenfield, 2005). professional monitoring not only helps build the confidence of Certified Public Accountants to force exercise due professional care and report truthfully, but also to promote audit quality and serve the profession to improve their image through quality signaling Audit High (fast and Heating Rasmussen, 2001). In addition, regulatory sanctions serve as deterrent to the ethical conduct of auditors to support regulatory sanctions as an incentive to improve auditor independence (Raymond, 2005), which contains the application of ethical standards is engineered for resolution of ethical dilemmas (and Citron Taffler 2001). The current environment of the accounting community has increased the importance of ethics and professional-quality trial with the accounting profession regarding auditor independence. The position of Enron and SOX past, the auditor appears to be sensitive to the risk of independence and independent trial and the intent of behavior does not seem to be affected (Martynov, 2005). The regulation of the profession in the form of auditing standards and guidelines to help meet a number of functions including improving the public image of the profession. Therefore, professional supervision will moderate the relationship between the intrinsic concentration ethics and independence of the audit. In other words, professional supervision will moderate the relationship between extrinsic stimuli and independence of the audit. And, therefore, leads to the hypothesis as follows:
Hypothesis 7: professional supervision will be moderated (a) the innate ethical relations audit independence property (b) ethics of intention to conduct audit independence relations, and (c) industrial relations audit of commitment to independence . Hypothesis 8: professional supervision will be moderated (a) the audit of market relations audit independence competition (b) economic relations audit dependence-independence, and (c) relations service of Independence to audit of the audit.
3. RESEARCH METHODS
3.1 Population and Sample
To effectively analyze the effects of all the relations of the hypothesis, this thesis chooses auditors in Thailand as a base population of this study. A database of 6. 893 names and addresses were obtained from the Thailand Department of Business Development (DBD
3.2 Survey Desig
For the design of surveys, questionnaire development process involved three steps used to ensure the validity of the test instrument. First, the questionnaire was based on the management accounting literature and to generate the construction field. Six variables of development of new measurement scales, since an appropriate scale could not be found. There is the intention of ethical, economic dependency of non-audit services, professional supervision, the credibility of auditing and sustainable success variables. Second, the questionnaire was reviewed by three experts and any misunderstanding that can reduce up ambiguities. Third, the questionnaire was pretested with a small sample before the final questionnaire was sent to the full sample. As a result of preliminary tests have been added or deleted words or sentences have been changed to increase the accuracy of communication throughout the questionnaire.
3.3 Data collection
A mail survey is used for data collection. A letter in the mail was sent to child protection, which contained a letter, a copy of the questionnaire, and a paid reply envelope. All respondents were guaranteed confidentiality and promised a summary of the results as an incentive. The data collection effort resulted in extensive satisfactory response rate and a reasonably large sample size. The pre-test questionnaire was almost identical to the final questionnaire with the exception of small changes. Since the measures and builds on the pre-test and a final questionnaire are the same, the 30 pre-test responses are included in the final analysis (Brown, 2003). As for the distribution questionnaire, 38 questionnaires could not be delivered because some auditors had moved to unknown places. Deducting the surrender of the 1870 original sent by mail, email valid was 1. 832 425 were received, yielding an effective response rate of 23. 20 percent. Of these, questionnaires were used, equivalent to an effective response rate of 22. 64 percent after accounting for unusable surveys. There were two reasons for unusable surveys, eight questionnaires were returned completely unanswered because the auditors are the audit work and two incomplete respondents. The overall response rate of the considered quite high compared to the same kind of mail survey research in Thailand (Singhapakdi et al. , 1994). However, the effective response rate was approximately 24%. According to Aaker et al. , (2001), the response rate to a mailed survey, without adequate follow-up procedure is less than 20%. Therefore, the response rate of this study is considered acceptable. In summary, the data were obtained primarily from 415 responses from a 46-item questionnaire sent to the child protection 1870 in Thailand. Ten respondents were missing data on demographic data. Fifty-five percent of the CPA sample represented women and the rest of the respondents were male. In terms of age and experience of audit, 92. 5% over 30 years of age and 88. 5% over 5 years experience in auditing. All public accountants had at least a bachelor's degree, with 67% higher degree of participation. The child protection audit clients had responded out of the estimated 85% GAME remaining respondents were composed within the SET and both inside and outside the SET. Almost 64% of independent public accountants and 12 were only. 5% of employees in large companies-4.
3.4 Test of Non-Response Bias
nonresponse bias in this study was evaluated by comparing early to late respondents (Armstrong and Overton, 1977). To examine the non-response error, the responses of the first 50 percent of respondents were defined as those who responded early and late 50 percent of respondents were defined as the final answers. Both groups were analyzed by comparing responses to the survey of child welfare respondents: first (208 questionnaires) and finally (207 questionnaires), to test the differences in response between the two groups. Means were compared and analyzed by t-test procedures for each of these two groups on the basis of twelve variables to scale: the concentration of ethics intrinsic (innate characteristic ethics, ethical behavior intentions and professional commitment), extrinsic stimuli (the audit market competition, economic dependence and non-audit services), audit independence, audit quality, audit credibility, reputation, sustainable success, and professional supervision. No differences were identified, providing some support for the absence of a nonresponse bias.
The literature search identified appropriate measures for the twelve buildings included in conceptual models. We use existing measures of the buildings as much as possible. Each variable related to the hypothesis Likerts responded in a five-point scale (1 = Strongly Disagree, 5 = Strongly Agree). All items of each variable was obtained directly so that the highest score indicates the higher the level of the variables. sustainable success here refers to the person
To examine the hypothesized relationships, this research also adds the control variables to the model. Firstly, the issue of gender differences in business, is relevant in ethical judgments, ethical awareness, and ethical behavior (O'Fallon and Butterfield, 2005), as was mentioned previously, The most research on differences between genders has focused on ethical differences which found that females are more concerned with ethical issues (Beltramini et al., 1984; Kelley et al., 1990) and will behave more ethically than males (Bue, 2000). Numerous studies have shown that females exhibit "stronger ethical attitudes" than their male counterparts (Sweeney, 1995; Emerson et al., 2007). In addition, females were more sensitive to and less tolerant of unethical situations than males (Okleshen and Hoyt, 1996; Ameen et al., 1996) and females make more ethical decisions than men (Glover et al., 1997). Other studies (Singhapakdi and Vitell, 1990; Abdolmohammadi et al., 2003) have found no difference between females' and males' ethical perceptions. Based on this dissertation, with an attention of gender as control variables was also probable to influence the hypothesized relationship. It was measured by dummy variable.
Secondly, the question of differences of experience in auditing business is relevant to ethical, ethical awareness, and ethical behavior
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