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The Effect of Client Fee Dependence on Audit Independence
Author(s) -
Barkess Lyn,
Simnett Roger,
Urquhart Paul
Publication year - 2002
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/j.1835-2561.2003.tb00207.x
Subject(s) - audit , revenue , independence (probability theory) , accounting , business , auditor independence , auditor's report , actuarial science , joint audit , internal audit , statistics , mathematics
This paper examines the effect of client fee dependence on the independence of audit firms. For the largest 25 audit firms for which fee revenue and total revenue could be determined, three research approaches were used to identify whether inappropriate audit opinions are being issued to large‐fee clients. All situations identified by an audit opinion prediction model as having a high probability of qualification were duly qualified. It was found that for the top 25 audit firms, the level of fee dependence from any one client was substantially below the level suggested in auditing standards. In summary, the investigation was unable to identify any instances of fee dependence impairing the independence of auditors.