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Bank loan officers' perceptions concerning independence, objectivity, and reliability when external auditors also perform tax compliance activities for nonpublic clients

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  • Thompson, Dave
  • Booker, Quinton

Abstract

This study examines bank loan officers' perceptions of auditor independence, objectivity and the reliability of the report on the financial statement when the attest auditors also provide (1) tax compliance services to the nonpublic entity that they audit, and (2) tax compliance services to executives of said entities. The primary issues addressed are (1) whether performing the external audit and providing tax compliance services for the same entity affects the aforementioned perceptions, and (2) whether adding tax compliance work for the executives of the entity affects these perceptions. We used a between-subject design and bank loan officers as participants. Findings based on 181 participants indicate that bank loan officers generally perceive a significant difference in independence and objectivity when the auditor also performs tax compliance work for the audited entity. On the other hand, loan officers do not perceive a significant difference concerning the reliability of the report on the financial statements. Similar results hold when tax compliance services for entity executives are added to the services performed with the exception that perceptions regarding the reliability of the report on the financial statements are also reduced significantly. Implications and limitation of these findings are discussed.

Suggested Citation

  • Thompson, Dave & Booker, Quinton, 2015. "Bank loan officers' perceptions concerning independence, objectivity, and reliability when external auditors also perform tax compliance activities for nonpublic clients," Research in Accounting Regulation, Elsevier, vol. 27(1), pages 14-20.
    • Handle: RePEc:eee:reacre:v:27:y:2015:i:1:p:14-20
    DOI: 10.1016/j.racreg.2015.03.002
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    References listed on IDEAS

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    1. Patrick L Anderson, 2009. "The Value of Private Businesses in the United States," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 44(2), pages 87-108.
    2. Wright, Carl N. & Booker, Q., 2010. "The effects of a cooling-off period on perceived independence of external auditors: A study in the nonpublic regulatory environment," Research in Accounting Regulation, Elsevier, vol. 22(1), pages 47-51.
    3. Roberts, Michael L., 2010. "Independence, impartiality, and advocacy in client conflicts," Research in Accounting Regulation, Elsevier, vol. 22(1), pages 29-39.
    4. Terando, William D. & Kurtenbach, James M., 2009. "The impact of tax law uncertainty on the development of the Sarbanes-Oxley auditor independence rules with regard to tax shelters," Research in Accounting Regulation, Elsevier, vol. 21(2), pages 118-124.
    5. Edward L. Maydew & Douglas A. Shackelford, 2005. "The Changing Role of Auditors in Corporate Tax Planning," NBER Working Papers 11504, National Bureau of Economic Research, Inc.
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