Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Auditor independence and incentives
AU - Lubberink, Martien
AU - Yin, Judy
PY - 2013/10/1
Y1 - 2013/10/1
N2 - This paper presents two methods of changing the incentives that auditors face with the goal of allowing an audit firm to continue to provide both audit an d nonaudit services (NAS). The first method requires audit firm employees (both auditors and N AS providers) to deposit a substantial share of their revenues into an individual escrow accoun t. If any material misstatements are uncovered in the published financial statements of their clien t, they lose their entitlement to the escrow account funds. The second method taxes NAS and re wards the auditor for knowledge acquisition, and for referring these clients to the N AS providers. Both methods are likely to lead to an augmentation of the quality of the services provide d by an audit firm. Further, they tend to lower the need for one-size fits all measures.
AB - This paper presents two methods of changing the incentives that auditors face with the goal of allowing an audit firm to continue to provide both audit an d nonaudit services (NAS). The first method requires audit firm employees (both auditors and N AS providers) to deposit a substantial share of their revenues into an individual escrow accoun t. If any material misstatements are uncovered in the published financial statements of their clien t, they lose their entitlement to the escrow account funds. The second method taxes NAS and re wards the auditor for knowledge acquisition, and for referring these clients to the N AS providers. Both methods are likely to lead to an augmentation of the quality of the services provide d by an audit firm. Further, they tend to lower the need for one-size fits all measures.
KW - Auditor independence
KW - audit services
KW - incentives
KW - nonaudit services
M3 - Journal article
VL - IV
SP - 1326
EP - 1334
JO - International Research Journal of Applied Finance
JF - International Research Journal of Applied Finance
SN - 2229-6891
IS - 10
ER -