The UK’s framework approach to auditor independence and the commercialization of the accounting profession

Abstract

If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.comEmerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services.Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation.Abstract This paper examines how the UK Chartered Accountants Joint Ethics Committee's (CAJEC) 1996 Statement Integrity, Objectivity and Independence, which was developed at a time of mounting levels of criticism of the auditing profession, provides legitimization for the accounting profession's increased commercial activities, particularly in the area of other business services. Parallel with a major shift in the nature of the activities of the professional firm, this ethics Statement gives expression to changes in the profession's concept of independence. It adopts a more accommodating method for evaluating the adequacy of an auditor's independence, introducing a``framework'' approach in contrast with its predecessor's``rule book'' approach. Both the Statement and respondents to the preceding Consultation Papers support the flexible system afforded by the framework in terms of promoting clients' economic interests. Moreover CAJEC's proposals did not include any initiatives to promote audit firm transparency which might have enabled external monitoring of compliance with the framework. Thus, while the Statement does place some limitations on the flexibility of the framework and retains the distinction between audit and other activities, it ultimately embodies a notion of independence that is at one with the interests of the profession.

Auditors’ professional and organizational identities and commercialization in audit firms

“…The literature has to some extent captured this development, which it refers to as commercialization of the audit industry. Terms like "profitability," "efficiency," "market strategy," "customer driver," "firmalization," "business process,""financialization" and "marketization" (e.g., Sharma and Sidhu, 2001;Citron, 2003;Clow et al, 2009;Sweeney and McGarry, 2011;Alvehus and Spicer, 2012;Broberg et al, 2013;Broberg, 2013;Picard, 2016) are some of the labels used to describe audit firms' development of a commercial orientation. Most studies that discuss this change have explored the impact of this commercial orientation on a number of outcomes, such as financial gain orientation and the efficiency of auditors and audit firms (e. g., Chesser et al, 1994;Sharma and Sidhu, 2001).…”

“…Most studies that discuss this change have explored the impact of this commercial orientation on a number of outcomes, such as financial gain orientation and the efficiency of auditors and audit firms (e. g., Chesser et al, 1994;Sharma and Sidhu, 2001). Some studies have explored auditors' unethical behavior and loss of independence (Humphrey and Moizer, 1990;Citron, 2003;Suddaby et al, 2009;Sori et al, 2010) and its ultimate effects on audit quality. Few studies, to our knowledge, have sought to explore the drivers of commercialization in the audit industry and those that have were primarily explorative and/or theoretical in nature.…”

In the Name of Independence: with Regard to Practicing Non-Audit Service by External Auditors

“…The audit failures that have been reported have led to major criticism of the auditing profession worldwide by exposing the weaknesses of the profession in term of safeguarding shareholders' and stockholders' interests (Brandon et al, 2004, Citron, 2003, Cullinan, 20004, Fearnley and Beattie, 2004, Ghosh and Moon, 2005, Gwilliam, 2003, Higson, 2003, Krishnan and Levine 2005; thus some of this criticism arose from non-audit service practices by auditors.…”

Exploration of Niche Market and Innovation in Organic Textile by a Developing Country

“…The audit failures that have been reported have led to major criticism of the auditing profession worldwide by exposing the weaknesses of the profession in term of safeguarding shareholders' and stockholders' interests , Citron, 2003, Cullinan, 20004, Fearnley and Beattie, 2004, Ghosh and Moon, 2005, Gwilliam, 2003, Higson, 2003, Krishnan and Levine 2005; thus some of this criticism arose from non-audit service practices by auditors.…”