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Auditor Independence in Canada: A Historical Perspective — From Shareholder Auditors to Modern‐Day Audit Committees *
Author(s) -
GREEN DUNCAN L.
Publication year - 2006
Publication title -
canadian accounting perspectives
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.238
H-Index - 17
eISSN - 1911-3838
pISSN - 1499-8653
DOI - 10.1506/cgmp-av06-ywg9-rj40
Subject(s) - accounting , auditor independence , audit , independence (probability theory) , shareholder , external auditor , auditor's report , redress , business , audit substantive test , legislation , perspective (graphical) , corporate governance , political science , law , internal audit , joint audit , finance , statistics , mathematics , artificial intelligence , computer science
This paper uses the theoretical framework of Goldman and Barlev (1974) to examine auditor independence in Canada. It traces the historical development of the auditor's role in the 19th century and the beginning of the auditor's relationship with shareholders and management. It shows how, following the separation of management from shareholding, management's ability to influence auditors undermined auditor independence. The paper traces attempts by legislators and regulatory bodies to limit management's influence over auditors and to correct the asymmetry of their relationship. It notes that recent changes to legislation and rules of professional conduct are no longer proactive, but are reactions to corporate scandals in Canada and the United States. The paper argues that although future changes will occur to redress the imbalance, only structural changes are likely to provide a real solution to auditor independence problems. However, it is likely that such changes will be resisted by the accounting profession.