Audit Fees and Auditor Independence: The Case of ISO 14001 Certification

Abstract

This study analyses the effects of audit fees and the clients' financial power on the independence of ISO 14001 auditors on the basis of a qualitative analysis of interviews with 36 professionals involved in the certification process. The results of the study demonstrate that most respondents support the legitimacy of the current remuneration system based on the user-pays principle, despite its business and financial ramifications, claiming that the independence of auditors is in fact ensured by the imposition of contractual duty, the observance of ethical codes, distancing the auditor from negotiations with the client, and dissociating the fee charged for the audit from the granting of the ISO 14001 certificate. However, the study demonstrates that auditors often adapt their behaviour to the client's economic context and the company size, which may call into question the prevailing opinion on the independence and impartiality of the certification process. This paper, on the one hand, discusses the manner in which auditors legitimize the current remuneration system and, on the other, describes the potential threat that it represents for their independence. The paper also highlights the similarities in this regard between the conflicts of interest in the field of environmental audits and in that of financial audits. Finally, the paper analyses a number of possible solutions to reduce the financial dependence of auditors on the audited companies.

ISO 14001, EMAS and environmental performance: A meta‐analysis

“…Most of the findings in the literature relied on perceptions, in particular the opinions of environmental managers on their own professional activity. As the scholarly literature on the adoption of EMSs reports (Aravind & Christmann, ; Darnall, Jolley, & Handfield, ; Demirel, Iatridis, & Kesidou, ; Dogui, Boiral, & Heras‐Saizarbitoria, ; Iraldo et al, ), these perceptions might be influenced by a social desirability bias or a self‐reporting bias (Arnold & Feldman, ). This issue could also affect the impact of the adoption of EMSs based on voluntary certifiable standards, but this issue has not been addressed yet by the scholarly empirical literature.…”

Titik Kritis Dalam Skema Sertifikasi Produk Elektrik-Elektronik Di Indonesia

“…Independensi auditor dalam proses penilaian kesesuaian menjadi perhatian sangat penting untuk menghilangkan ketergantungan auditor terhadap biaya jasa audit dan kekuatan finansial klien. Sebuah penelitian memperlihatkan bahwa auditor sering menyesuaikan perilaku mereka dengan konteks ekonomi klien dan ukuran perusahaan yang dapat meragukan prinsip ketidakberpihakan dalam proses sertifikasi (Dogui, 2014).…”

“…Auditor yang kompeten senantiasa menjauhkan diri dari negosiasi dengan klien, ketaatan kode etik auditor, dan memisahkan antara biaya jasa auditor dengan paket biaya untuk audit dari pemberian sertifikat ISO 14001 (Dogui, 2014). Cara yang ideal adalah auditor tersebut diberikan biaya jasa didasarkan sistem remunerasi yang di dalamnya adalah pencapaian key performance yang diperiksa setiap kenaikan level (Dogui, 2014).…”

Environmental Audits and Third Party Certification of Management Practices: Firms’ Motives, Audit Orientations, and Satisfaction with Certification

“…In terms of voluntary standards, the variation has been attributed to various forces such as different firms’ motives for certification (Prajogo, ); company culture (Balzarova et al ., ; Sandholtz, ); institutional nature of various industries or variations of the quality of consulting services during the implementation phase (Ivanova, Gray, & Sinha, ). However, the research thus far has paid comparatively less attention to environmental audits and their role in ISO 14001 certification (Dogui, Boiral, & Heras‐Saizarbitoria, )…”

“…In terms of voluntary standards, the variation has been attributed to various forces such as different firms' motives for certification (Prajogo, 2011); company culture (Balzarova et al, 2006;Sandholtz, 2012); institutional nature of various industries or variations of the quality of consulting services during the implementation phase (Ivanova, Gray, & Sinha, 2014). However, the research thus far has paid comparatively less attention to environmental audits and their role in ISO 14001 certification (Dogui, Boiral, & Heras-Saizarbitoria, 2014) Environmental audits have a critical role in ISO 14001 certification. The audit is conducted by accredited certification bodies and firms have a wide choice of certification bodies for their selection (e.g., in Australia and New Zealand, over 20 certification bodies are accredited for ISO 14001 audits).…”