Governing anti-corruption and perceived auditor independence
ISSN: 0268-6902
Article publication date: 7 April 2023
Issue publication date: 22 May 2023
Abstract
Purpose
The growing international legal agenda and the fast development of corporate governance rules are now prompting firms to put emphasis on anti-corruption procedures. On the other hand, wide-ranging concerns have been raised by regulators and policymakers regarding the effectiveness of audit committees in promoting ethical behavior and safeguarding auditor independence from the adverse consequences of purchasing non-audit services. The purpose of this paper is to examine the relationship between the adoption of anti-corruption measures and perceived auditor independence in the context of audit committees.
Design/methodology/approach
After conducting the Breusch–Pagan Lagrange Multiplier test and the Hausman test, the random-effect model is used as the most appropriate estimator. Several endogeneity tests are also used to account for the endogenous nature of the corporate governance variables in the models.
Findings
Using a sample of UK FTSE 350 firms, this paper provides evidence that anti-corruption efforts are associated with lower purchases of non-audit services and lower economic bonding between auditors and their clients. Furthermore, the findings of this paper reveal that the adoption of anti-corruption efforts substitutes the role of audit committees in enhancing perceived auditor independence and that audit committees do not play a significant incremental role.
Originality/value
To the best of the author’s knowledge, this is the first study of its kind to focus on bolstering perceived auditor independence while enhancing the control and ethical environment from the clients’ side instead of the auditors’ side.
Keywords
Acknowledgements
The author is grateful for constructive comments on an earlier draft from Mahbub Zaman, Gregory Trompeter and Natalia Mintchik and from participants at the AAA Public Interest in Accounting Conference.
Funding: This work was supported by the American University of Beirut (URB grant number 103796).
Declarations of interest: none.
Citation
Al-Okaily, J. (2023), "Governing anti-corruption and perceived auditor independence", Managerial Auditing Journal, Vol. 38 No. 5, pp. 710-730. https://doi.org/10.1108/MAJ-02-2022-3452
Publisher
:Emerald Publishing Limited
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