Auditor independence and the expectations gap: Some evidence of changing user perceptions

Pages159-170
Date01 February 1998
Publication Date01 February 1998
DOIhttps://doi.org/10.1108/eb024966
AuthorVivien Beattie,Richard Brandt,Stella Fearnley
SubjectAccounting & finance
Journal of Financial Regulation and Compliance Volume 6 Number 2
Auditor independence and the expectations
gap:
Some evidence of changing user
perceptions
Vivien Beattie,* Richard Brandt and Stella Fearnley
Received: 15th January, 1998
*Department of Accountancy and Finance, University of Stirling, Stirling, FK9 4LA; tel. 01786 467306;
fax. 01786 467308
department of Accounting and Management Science, University of Portsmouth, Locksway Road,
Portsmouth, Hants, PO4 8JF; tel. 01705 844095; fax. 01705 844037.
Vivien Beattie MA(Hons), CA, PhD, is Pro-
fessor of Accounting in the Department of
Accountancy and Finance, University of
Stirling. She currently holds the part-time
appointment of Director of Research for
the Institute of Chartered Accountants of
Scotland.
Richard Brandt MA, FCA, FRSA, is a
Research Fellow at the University of Ports-
mouth Business School. He was for nine
years Head of Audit at Grant Thornton,
and is a former member of the Urgent
Issues Task Force, a subsidiary body of
the Financial Reporting Council. He is
editor of the 1998-99 edition of 'Auditing &
Reporting', to be published by the Institute
of Chartered Accountants in England &
Wales.
Stella Fearnley BA, FCA, FRSA, is a Prin-
cipal Lecturer in Accounting in the
Uni-
versity of Portsmouth Business School,
and a former senior technical manager in
Grant Thornton. She is an elected
member of the Council of the Institute of
Chartered Accountants in England &
Wales and currently Deputy Chair of its
Research Board.
The authors gratefully acknowledge the
financial support of the Research Board of
the Institute of Chartered Accountants in
England and Wales for this
study.
The
views expressed are their own.
ABSTRACT
The audit function is an essential part of the
regulatory
structure
which supports the integrity
of our capital markets. There is a recognised
expectations gap which surrounds the audit
function, as many users of audited financial
statements have different expectations of the
audit function from what it delivers. Perceptions
of
auditor independence
are
a
fundamental part
of this expectations gap. In the light of
recent
significant
changes
to the
regulatory
framework,
this paper reports a survey of
leading
financial
journalists, to ascertain their current views on
auditor independence. Findings show a belief
that some of the changes have reduced the
expectations
gap although problems still exist in
the area of non-audit services. However, the
most significant threat to
independence
is seen to
be the economic and personal pressure on the
partner as an individual, an
area
difficult to reg-
ulate. The challenge for audit firms is to
demonstrate how well they control for this
within their management structures.
Journal
of Financial Regulation
and
Compliance.
Vol. 6, No. 2,
1998, pp. 159-170
©
Henry Stewart
Publications,
1358-1988
Page 159

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