CEO image, NAS and risk assessment

Govind S. Iyer and Philip M.J. Reckers

Managerial Auditing Journal, 2007, vol. 22, issue 9, 895-912

Abstract: Purpose - The purpose of this paper is to examine the interactive effect of the provision of non‐audit services (NAS) and auditors' perceptions of management integrity on assessments of risk of material misstatement. Design/methodology/approach - The research method consisted of a behavioral experiment involving 47 audit seniors from a big‐four accounting firm. Findings - Manipulations of management integrity significantly affected risk assessments. Manipulations of NAS did not affect risk assessment. However, a significant interaction manifested itself – participants who role‐played auditors providing significant tax consulting services tended to highly discount the incremental risk of material misstatement arising out of dubious management integrity, compared with their counterparts who role‐played auditors not providing any NAS. Research limitations/implications - This study shows that, while provision of NAS may not in and of itself impact auditor independence, it has the potential to impact audit quality by mitigating the effect of other audit evidence. This study also highlights the importance of testing for interactions since main effects may not readily capture the complexities involved. Practical implications - The finding calls for continuing attention to the issue of NAS provision and audit firm culture and a redoubling of efforts to ameliorate the effects of auditor‐provided NAS. Originality/value - This is one of the few papers that consider the interactive effect of provision of NAS and CEO image on assessment of management integrity. This is important because the likelihood of fraud increases when management integrity is suspect and the auditor is not vigilant.

Keywords: Chief executives; Auditors; Risk assessment (search for similar items in EconPapers)
Date: 2007
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:02686900710829408

DOI: 10.1108/02686900710829408

Access Statistics for this article

Managerial Auditing Journal is currently edited by Professor Jie Zhou

More articles in Managerial Auditing Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().