CÓMO ACTÚAN LAS EMPRESAS FRENTE A LA DEPENDENCIA ECONÓMICA DEL AUDITOR?: EL PAPEL DEL COMITÉ DE AUDITORÍA/HOW DO FIRMS MANAGE THE AUDITOR'S ECONOMIC DEPENDENCE? THE ROLE OF THE AUDIT COMMITTEE

Literature states that the auditor's economic bond on a client company could undermine auditor independence. One of the primary functions of an audit committee is to safeguard auditor independence. However, the audit committee is a mechanism within the governance structure of the client firm. T...

Full description

Saved in:
Bibliographic Details
Published in:Revista de contabilidad 2011-01, Vol.14 (1), p.87
Main Authors: López, Estíbaliz Biedma, Barbadillo, Emiliano Ruiz, Aguilar, Nieves Gomez
Format: Article
Language:Spanish
Subjects:
Accountant independence
Audit committees
Corporate governance
Studies
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Literature states that the auditor's economic bond on a client company could undermine auditor independence. One of the primary functions of an audit committee is to safeguard auditor independence. However, the audit committee is a mechanism within the governance structure of the client firm. Therefore, it depends on this firm that its audit committee possesses the characteristics necessary to be effective. This study analyses whether firms' decision regarding the degree of independence of the audit committee is determined by the level of economic dependence of their auditors. By mean of a panel data analysis in a sample of Spanish companies between 1998 and 2005, results confirm the existence of a significant relation between the level of independence of the audit committee and the degree of economic dependence of the auditor. Moreover, firms with auditors less economically dependent are those which establish more independent audit committees. These results represent an important contribution to previous literature as provide evidence concerning the strategy followed by firms in the joint design of mechanisms which guarantee the quality of financial reporting system. In addition, they were obtained taking into consideration some of the methodological limitations that have been identified as major obstacles in research on corporate governance, such as endogeneity and unobservable heterogeneity. [PUBLICATION ABSTRACT]
ISSN:1138-4891