Perceptions of Auditor Independence: an Analysis of Views Before and After the Collapse of Enron

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CPAs’ Perceptions of Auditor Independence: An Analysis of Views Before and After the Collapse of Enron Deborah L. Lindberg, D.B.A. Associate Professor Department of Accounting Illinois State University Frank D. Beck, Ph.D. Assistant Professor Department of Sociology & Anthropology Illinois State University November 2002 Direct all correspondence to: Deborah L. Lindberg, Illinois State University, College of Business, Department of Accounting, Campus Box 5520, Normal, IL, USA 61790-5520; Telephone: (309) 438-7166; Fax: (309) 438-8431; E-mail: dllindb@ilstu.edu. The authors are grateful for financial support from the American Accounting Association and Illinois State University; research support from the Illinois Society of Certified Public Accountants; helpful comments and suggestion from Dr. Dennis Patten on an earlier draft of this manuscript; and work performed by Illinois State University Research Assistants Vicki Lavery, Nick Nourse, Glen Steiner, Laura Vahling, and Yan Zheng. CPAs’ Perceptions of Auditor Independence: An Analysis of Views Before and After the Collapse of Enron Deborah L. Lindberg Illinois State University Frank D. Beck Illinois State University ABSTRACT: Auditor independence helps to ensure quality audits and contributes to financial statement users’ reliance on the financial reporting process, thus increasing capital market efficiency (McGrath, Siegel, Dunfee, Glazer & Jaenicke 2001). Hence, auditor independence is often referred to as the cornerstone of the auditing profession, since it is the foundation for the public’s trust in the attest function (Caswell & Allen 2001; The Economist February 9, 2002). By contrast, Byrnes, McNamee, Brady, Lavelle & Palmeri (2002) and many others (e.g., Greising 2002; The Economist January 19, 2002; The Economist February 9, 2002) have stated that the collapse of Enron has had a very negative impact on

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