It is important for an auditor to be independent both in mind and in appearance. The independence of the auditor is important for the trustworthiness of the auditor. Independence in appearance is the focus of this study and is how independent the auditor appears to be from the perspective of other stakeholders. This will be studied from the perspective of clients. The audit does not only have to be useful for the owners, but also for the client who pay for the audit. The aim of this study is to explain what factors that are affecting how clients perceive the auditor independence in Sweden. The study also wants to investigate if the client firm size affects the relationship between independence in appearance and factors affecting independence in appearance. To answer this, a questionnaire was sent via email to small and large limited companies in Sweden. This study found that audit tenure and auditor-client relationship partly have an influence on independence in appearance. How long the client has had the same audit firm is positively related to independence in appearance and how often the client has contact with the auditor is negatively related to independence in appearance. Client firm size couldn’t be used as a moderating variable since too few responses was received.

This dissertation investigates auditor independence by examining the effects of various factors on independence, both in fact and as perceived by several distinct groups. The first study examines the effects of auditing students' cognitive moral development and client risk on students' judgments related to an audit partner's acquiescence to client pressure in an earnings management scenario. The results indicate that students with higher levels of moral reasoning evaluated earnings management as less ethical and were also less likely to accept earnings management by an audit client. The results also indicate that subjects in a high client risk scenario evaluated earnings management as less ethical and were also less likely to accept earnings management by an audit client. Furthermore, this study investigated whether client risk moderates the effect of cognitive moral reasoning on ethical judgments and behavioral intentions. The results do not indicate an interaction. The second and third studies deal with potential consequences associated with the perceived impairment of auditor independence. Specifically, the second study deals with the effects of auditor-provided non-audit services on the client company's bond rating. If financial statement users believe that auditors providing non-audit services impairs the auditor's independence, they are likely to recognize an increase in information risk associated with such impairment (Johnstone et al. 2001). This could occur regardless of the true nature of the auditor's independence and would suggest a negative relationship between the amount of non-audit services purchased from the company's auditor and the company's bond rating. The results of this study support that contention. The third study investigates the effects of client importance and audit firm size on juror evaluations of auditor liability and damage awards. Previous research in accounting shows that client importance can affect sophisticated financial statement users' perceptions of auditor independence. However, no study has investigated perceptions of auditor independence in a litigation context. The results indicate that when an auditor is involved in litigation associated with an audit client that is financially more important to the auditor, jurors' evaluations of negligence are higher and they assess more in punitive damages. No effect of audit firm size on negligence ratings or damage awards is found. / Ph. D.

This dissertation explores three current issues relevant to the accounting and business communities by empirically examining the effect these issues have on the bond credit market. The first study examines the effect earnings predictability has on both the initial bond rating and the initial pricing of the issue. Earnings predictability is measured as (1) the annual earnings surprise (actual minus analyst forecast) and (2) the dispersion of initial analyst forecasts. The results indicate a negative association between a lack of earnings predictability and both bond ratings and initial bond price. The results are consistent with creditors interpreting greater earnings variability as a dimension of default risk incremental to the benchmark model. These results add to the existing literature by documenting a favorable benefit in the credit arena for firms that have predictable earnings. The second study investigates the effect perceived auditor independence has on the rating assigned to newly issued bonds. The magnitude of non-audit service fees is utilized as a proxy for auditor independence. The results of the study document a consistent negative relationship between the level of non-audit fees provided by the external auditor and the bond rating received by the client for new issues. Several non-audit fee measures are used in the study (raw measure, log scaled, asset scaled, unexpected) and each possess a significant negative association with a firm's bond rating. Importantly, no economic effect was discernable in a classification accuracy analysis. The third study examines what effect, if any, longer auditor tenure has on the client's bond rating. There is some contention that longer auditor tenure can lead to substandard audits either through the auditor's excessive desire to retain the client or through general auditor complacency. However, the issue of auditor tenure is far from one-sided. An alternative view asserts that longer auditor tenure increases client-specific knowledge and, thus, results in increased audit quality. Results indicate a positive association between auditor tenure and the client's bond rating on new issues suggesting that longer auditor tenure is perceived to be beneficial by bond rating analysts. This is consistent with financial statement users perceiving longer tenured auditors to have more client specific knowledge thus increasing auditor competency and a better audit. Overall, these results contribute to the existing knowledge-base in accounting by empirically demonstrating how several important issues of interest to the accounting profession are impounded into a firm's bond rating. This research provides a detailed look at how one important group of knowledgeable financial statement users, i.e. bond rating analysts, incorporate several issues that are relevant and important to the professional community. / Ph. D.

<p>Auditing has long existed and it was in 1899 that the first Swedish organization for accountants SRS, Swedish Audit Society, was created and in 1923 that FAR, Association of Chartered Accountants, was formed. It was after the Kreuger crash in the 1930s that authorized auditors had their breakthrough. After the crash the accounting profession has endured fierce criticism when the audit was flawed and it was during this period that authorized auditors became more widespread, the concept was developed independently and the importance of auditor independence became evident.</p><p>We have in our paper therefore chosen to focus on auditor independence and to make that it requires the independence to relate to something. Therefore we have chosen to focus on the interaction between the auditor and the client. To explain what independence means we have used the analysis model, the expectation gap and communication, and explain what the audit entails and what tasks the auditor has. To do this, we used the qualitative method and interviewed two auditors, an auditor at KPMG and one at ÖPWC. In order to get another perspective we also interviewed two clients, Eskilstuna-Kuriren AB and Eskilstuna Energi och Miljö AB.</p><p>Auditing means that with a professional critical attitude plan, review, evaluate and comment on management, annual report and accounts. Auditor's role is simply to assure the quality of information. This requires that the auditor is independent and follows confidentiality, and assumes professional ethics and generally accepted auditing. In order to reduce the expectation gap it is important that the information and communication between auditor and the client works well.</p><p>In this paper we found that the analysis model is an important tool for examining auditor independence for each new assignment and each new year. We also found that our respondents believe that an open dialogue is important and that the auditor will act as a sounding board. Our clients do not feel that there is a gap in expectations because they have a record in the auditing profession and know what an auditor should and must do.  </p>

<p>With the wave of crises in the early 2000 notably Enron, auditor independence was put in the spotlight which has continually threatened the integrity of the entire auditing profession. Connected to these accounting scandals, it could be realized that most of the auditors involved in the audits of these corporations had long standing relationship with these clients. In other words, the auditors had extended audit tenures. This puts the issue of audit tenure into the open that is as to how long should auditors serve a client?</p><p>The general purpose of this study is to examine whether extended audit tenures can lead to the emergence of threats to auditor independence which may impair the auditor independence. Our study is quantitative, using a self-administered web-survey to collect our data. The study provides results from a cross sectional design to examine the impact of extended audit tenures on auditor independence. This impact is compared across short and extended (long) tenures on the basis of the threats to auditor independence. Using paired samples t-test in SPSS for our sample of authorized or approved Swedish auditors; we find that extended audit tenures impact self-interest, self-review and intimidation threats that affects auditor independence. Our findings did not reveal any relationship between the advocacy and familiarity threats and the impact extended audit tenures have on them, hence we rejected the hypotheses relating to these threats. However, though the relationship was still not strong, the results for self-interest, self-review and intimidation threats proved significant and this prompted us to accept the respective hypotheses. In conclusion, our results show that there is an association of auditor independence to extended audit tenures.</p>

Auditing has long existed and it was in 1899 that the first Swedish organization for accountants SRS, Swedish Audit Society, was created and in 1923 that FAR, Association of Chartered Accountants, was formed. It was after the Kreuger crash in the 1930s that authorized auditors had their breakthrough. After the crash the accounting profession has endured fierce criticism when the audit was flawed and it was during this period that authorized auditors became more widespread, the concept was developed independently and the importance of auditor independence became evident. We have in our paper therefore chosen to focus on auditor independence and to make that it requires the independence to relate to something. Therefore we have chosen to focus on the interaction between the auditor and the client. To explain what independence means we have used the analysis model, the expectation gap and communication, and explain what the audit entails and what tasks the auditor has. To do this, we used the qualitative method and interviewed two auditors, an auditor at KPMG and one at ÖPWC. In order to get another perspective we also interviewed two clients, Eskilstuna-Kuriren AB and Eskilstuna Energi och Miljö AB. Auditing means that with a professional critical attitude plan, review, evaluate and comment on management, annual report and accounts. Auditor's role is simply to assure the quality of information. This requires that the auditor is independent and follows confidentiality, and assumes professional ethics and generally accepted auditing. In order to reduce the expectation gap it is important that the information and communication between auditor and the client works well. In this paper we found that the analysis model is an important tool for examining auditor independence for each new assignment and each new year. We also found that our respondents believe that an open dialogue is important and that the auditor will act as a sounding board. Our clients do not feel that there is a gap in expectations because they have a record in the auditing profession and know what an auditor should and must do.

Purpose: The purpose of this study is to seek understanding, describe and analyse how auditors practically reassure and maintain their independence towards clients. Methodology: The study is conducted with a qualitative method with a deductive approach. The study is based on interviews with both experienced and recently graduated auditors. Conclusion: Our empirical results show that there are economical incentives that contradict the requirements to fulfil the auditor’s independence. The conclusion is that the media view is narrow and biased. Furthermore the auditors agree that an acceptable level of comfort is achieved by offering a high value, being a part of a large network of professionals and the ability to set materiality and evaluate risks.

With the wave of crises in the early 2000 notably Enron, auditor independence was put in the spotlight which has continually threatened the integrity of the entire auditing profession. Connected to these accounting scandals, it could be realized that most of the auditors involved in the audits of these corporations had long standing relationship with these clients. In other words, the auditors had extended audit tenures. This puts the issue of audit tenure into the open that is as to how long should auditors serve a client? The general purpose of this study is to examine whether extended audit tenures can lead to the emergence of threats to auditor independence which may impair the auditor independence. Our study is quantitative, using a self-administered web-survey to collect our data. The study provides results from a cross sectional design to examine the impact of extended audit tenures on auditor independence. This impact is compared across short and extended (long) tenures on the basis of the threats to auditor independence. Using paired samples t-test in SPSS for our sample of authorized or approved Swedish auditors; we find that extended audit tenures impact self-interest, self-review and intimidation threats that affects auditor independence. Our findings did not reveal any relationship between the advocacy and familiarity threats and the impact extended audit tenures have on them, hence we rejected the hypotheses relating to these threats. However, though the relationship was still not strong, the results for self-interest, self-review and intimidation threats proved significant and this prompted us to accept the respective hypotheses. In conclusion, our results show that there is an association of auditor independence to extended audit tenures.

Det är mycket viktigt att en revisor är oberoende, detta för att ge en opartisk och rättvis bild av finansiella rapporter. Den kommunala revisionen har de förtroendevalda revisorerna som ska granska att verksamheten sköts på ett tillförlitligt sätt enligt god revisionssed. Dock har proceduren för utnämnandet av de förtroendevalda revisorerna kritiserats i media för att vara partiskt och jävigt. Tidigare forskning lyfter fram olika hot som kan påverka en yrkesrevisors oberoende och opartiskhet i sitt arbete. Vissa av dessa hot väljs ut och undersöks. Har de utvalda hoten även en påverkan på de förtroendevalda revisorerna i Sveriges kommuner? Hot mot oberoende undersöks i form av tre undersökningsfrågor: rådgivning, kvalitetskontroller samt längden på uppdraget. Det har utformats en modell där undersökningsfrågorna ingår, giltigheten på denna testas. Insamlandet av datamaterialet har erhållits genom en sluten enkätstudie där 660 stycken kommunfullmäktige och förtroendevalda revisorer, runt om i landet, har svarat. Svaren har bearbetats och analyserats med hjälp av SPSS och Minitab. Resultatet visade att två av de tre undersökningsfrågorna hade en inverkan på oberoendet hos de förtroendevalda revisorerna. Studiens slutsats påvisade att respondenternas inställning till oberoendet främst kan förklaras av rådgivning och uppdragstidens längd, men även av politik som blev en ny undersökningsdel, modellen blev därför korrigerad. / It is very important that an auditor is independent, in order to give an impartial and fair view of the financial statements. The municipal audit has auditors who are trusted to review the organization. This is managed in a reliable manner according to generally accepted auditing standards. However, the procedure for the nomination of the trusted auditors is criticized in the media for being biased. Previous research highlights the different threats that may affect the auditor's independence and objectivity in their work. Some of these threats are chosen and examined. Do these threats also have an influence on the trusted auditors in Swedish municipalities? Threats against independence are examined in terms of three study factors: counseling, quality controls and auditor tenure. A model has been designed in which survey questions are included. It´s validity is later tested. The collection of the data is obtained through a closed survey in which 660 city council and trusted auditors have responded. The responses were processed and analyzed with the help of SPSS and Minitab. The results demonstrated that two of the three study factors had an impact on the independence of the local municipal audit. The study's conclusion clarifies that respondents' attitude towards independence is mainly reflected over counseling and auditor tenure but also of politics, that in the end became a new study factor, and therefore changed the models appearance.

Background: The audit has not always been as it is today. The first law requiring auditing was legislated in the Companies Act 1895. Many events have taken place in the audit history; among them was the Krueger crash, which affected the auditing profession hard in Sweden. This led to new recommendations and laws that would save the profession. Because of the events in the past, there are many who question the audit profession and discussions have been held regarding the auditor's independence and objectivity. Nov. 1, 2010 abolished the audit requirement for certain companies. Purpose: The purpose of this study is to describe and analyze the role of the auditor - the independence and objectivity, by perusing the number of qualified / unqualified audit reports, before and after removal of the audit requirement. Methodology: To answer the study's purpose, a quantitative study was conducted in which 400 annual reports from Stockholm and 200 annual reports outside of Stockholm, has been selected to be examined, to see how the number of qualified / unqualified audit reports has changed during the years 2008-2011. Theoretical Framework: The theories that have been applied in the study are the auditor's role, Independence &amp; Objectivity and Profession. Framework: To complement the theoretical framework the audit significance, audit procedure, audit report and previous studies have been applied. Empirism: The data collected for this study is illustrated in diagrams showing that 2010 was a defining year where most unqualified audit reports were reported, while the remaining years showed non or few unqualified audit reports. Conclusion: Based on the empirical evidence presented, auditor's independence and objectivity has been questioned. Clear indications that the audit requirement has influenced the audit profession is illustrated in the diagrams from empirical data, however, it is too early to say if it has a positive or negative impact on profession.