Auditor independence, self-interested behavior and ethics: some experimental evidence

Our paper presents the results obtained in a laboratory environment in which subjects revealed their beliefs about an uncertain state of the world and then participated in a simple task which required them to report on whether the report of a second party is consistent with the subjects’ beliefs. Be...

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Bibliographic Details
Published in:Journal of accounting and public policy 1999, Vol.18 (4), p.395-428
Main Authors: Falk, Haim, Lynn, Bernadette, Mestelman, Stuart, Shehata, Mohamed
Format: Article
Language:English
Subjects:
Accountant independence
Auditing
Auditors opinions
Economic behaviour
Economic theory
Ethics
Hypotheses
Professional ethics
Profit maximization
Regression analysis
Studies
Uncertainty
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Summary:Our paper presents the results obtained in a laboratory environment in which subjects revealed their beliefs about an uncertain state of the world and then participated in a simple task which required them to report on whether the report of a second party is consistent with the subjects’ beliefs. Because maintaining prior judgements (audit independence) which were in disagreement with the second party’s decision (a potential for a qualified audit opinion) were costly to the subject, a situation was created in which the subject might compromise her beliefs at a price. The results suggest that amoral, self-interested profit-maximizing behavior does not generally characterize the subjects in this experiment. Furthermore, subjects compromise their beliefs less often, i.e., breach independence, the higher their scores on a Defining Issues Test, but more often, the greater the cost of adhering to their beliefs.
ISSN:0278-4254
1873-2070
DOI:10.1016/S0278-4254(99)00012-5