Auditors’ Employment with Clients and Interaction with their Former CPA Firm

UNCG Author/Contributor (non-UNCG co-authors, if there are any, appear on document)
Venkatarama M. Iyer, Associate Professor (Creator)
The University of North Carolina at Greensboro (UNCG )
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Abstract: It is not unusual for auditors to accept employment with audit clients upon leaving the audit firm. For example, Inthoff (1978) found that approximately 20 percent of the auditors in his sample accepted employment with a client firm. However, in recent years, the Independence Standards Board (ISB), the Securities and Exchange Commission (SEC), and the American Institute of Certified Public Accountants (AICPA) have expressed concerns about auditors' employment with their audit clients. Such concerns primarily relate to possible impairment of auditor independence. For example, the ISB noted that "a concern with partners or professional staff joining clients is that the remaining audit team members, because of their past relationship with the professional now in a position of importance with the client, may be reluctant to challenge the decisions or positions taken by the former partner or other professional" (1999: 13). Hence, this topic is of considerable interest not only to the accounting profession but also to financial statement users as well as corporate managers. The objective of this study is to provide empirical evidence about the perceptions of company executives and managers about their ability to resolve disagreements with their auditors who happen to be their former employers. While prior research has studied the perceptions of users and auditors (Imhoff, 1978; Parlin and Bartlett, 1994) on employment with audit clients, this is the first study that looks at clients' perceptions about their influence on auditors. Perceptions may be particularly useful in this context because (1) actual data about resolving disagreements with former colleagues are extremely difficult to obtain, and (2) perceptions can influence actions. We believe that this research is relevant to the general concern about auditors' employment with audit clients.

Additional Information

Journal of Managerial Issues. Winter 2002. 14(4)
Language: English
Date: 2003
Auditors, Employment, Audit clients, Perceptions of influence, Auditor independence

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