The influence of the types of NAS provisions and gifts hospitality on auditor independence

Abstract

PurposeAuditor independence is regarded as the cornerstone in the auditing profession. But there is lack of research to examine the influence of the types of non‐audit services provisions and gift hospitality on auditor independence. This paper aims to fill this gap.Design/methodology/approachThis Hong Kong study differs significantly from prior studies and is the first to examine the perceived independence by encompassing both qualitative and quantitative analysis. Binary logistic regression is used to capture data from Big 4 auditors and financial analysts' viewpoints.FindingsResults indicate that auditor independence decreases as the auditors provide accounting services, internal audit or corporate finance services to the firms. Corporate finance services have the greatest negative impact. However, it contributes new knowledge to the literature that the provisions of taxation services to clients are value‐added service and confirms the result in the US study. Receiving gift or hospitality from client has no influence on perceived independence and revokes an early study by Pany and Reckers. There is no expectation gap found between the groups, narrowing the expectation gap theory in the post‐Enron and revokes the US and the UK studies.Practical implicationsThe expectation gap theory seems to be narrowed in the post‐Enron environment. It is hoped that a longitudinal study could be conducted in future.Originality/valueThis paper adds new contributions to the auditing literature in the Asia Pacific Region and provides better understanding for devising auditing guidelines in Hong Kong and their international counterparts.

The Effect of Non-Audit Services on Auditor Independence: Evidence from Vietnam

“…Moreover, our research gives the evidence for the positive impact of supplying taxation services on auditor independence in Vietnam and the same trend is also found in research of Law (2010) in Hong Kong. When compared to findings of Le (2017) with the same research environment, which shows taxation services deteriorate auditor independence, our research results show the converse, paving the way for another perspective on this relationship.…”

“…In addition to management advisory services and taxation services, Law (2010) showed that the provision of internal audit services also influenced auditor independence. The foregoing discussion and rationale leads to the following hypotheses:…”

A Cross-Cultural Examination of Auditors' Willingness to Relocate in Public Accounting: Evidence from Hong Kong and the United States

“…The rationale for using Big 4 auditors in our study is that Big 4 auditors can more easily relocate within the same firm or to other accounting firms in other countries. Big 4 accounting firms have been expanding their practices to include a wide array of audit and non‐audit services in their businesses (Law, , , ). In addition, Big 4 auditors audit most of the large multinational companies (Shafer, Morris & Ketchand, ), so the opportunity to relocate for Big 4 auditors is higher (Law, ).…”

Caesar’s wife must not just be honourable, but must appear to be so: The case of auditor independence in Greece

“…This is justified given that valuable gifts can be considered a type of fee provided in an indirect form and, as mentioned above, income is the main factor affecting auditors' independence. Nevertheless, Law (2010) concluded that the offer of valuable gifts does not affect auditors' independence, this being a practice common in the Chinese culture where the research was held, however, this is not the case in Greece.…”