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URL:
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https://ub-madoc.bib.uni-mannheim.de/1778
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URN:
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urn:nbn:de:bsz:180-madoc-17788
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Document Type:
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Working paper
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Year of publication:
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2007
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The title of a journal, publication series:
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Working papers
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Volume:
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146
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Place of publication:
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Mannheim
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Publication language:
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English
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Institution:
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Business School > Sonstige - Fakultät für Betriebswirtschaftslehre
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MADOC publication series:
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Lehrstuhl für ABWL, Finanzwirtschaft, insb. Bankbetriebslehre (Weber) > Working Papers
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Subject:
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330 Economics
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Classification:
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JEL:
M49 K22 G38 G34 C90 ,
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Subject headings (SWD):
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Rechenschaft , USA / Sarbanes-Oxley Act , Audit Committee , Jahresabschlussprüfung , Unabhängigkeit
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Keywords (English):
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Accountability , Audit Committee , Auditor Independence , Client Retention Incentives , Experience , Professional Skepticism
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Abstract:
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In the U.S., the Sarbanes-Oxley Act made the audit committee responsible for the appointment, compensation and oversight of the auditor. We examine whether this institutional change resolves the alleged problem of an unconscious favoring of the management (Bazerman et al. 1997, 2002, 2006). In our experimental design, we make use of the particular features of the German institutional setting as it enables us to manipulate the client of the auditor in a realistic and clear-cut way. First, we find that auditors demonstrate professional scepticism in the evaluation of evidence while they issue unbiased audit opinions. Second, we confirm that perceiving financial incentives to be high may bias the audit opinion. Making the auditor accountable to a supervisory board proved helpful in reducing this risk. Third, we show that auditors who perceive the psychological incentives to be high tend to favor the judgment of the management. This effect disappears for experienced auditors.
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Additional information:
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Available at SSRN: http://ssrn.com/abstract
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Working papers
Mannheim
146
[Working paper]
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