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This study aims to examine the under-researched relationship between audit committee independence and earnings management in a number of emerging Middle Eastern and North African (MENA) countries.

Ordinary least squares regression was used to study the association between audit committee independence and earnings management in a sample of 3,206 firm-year observations during the years 2007–2017. Data were obtained from the Thomson Reuters Compustat database.

The main results show that audit committee independence has a negative association with accrual-based earnings management. The results also document no evidence to suggest that audit committee independence has any significant relationship with real earnings management.

This study provides new evidence of the impact of the independence of the audit committee in decreasing earnings management in MENA region, which was not addressed in previous studies.

This study has a significant practical implication for regulators and corporate governance policymakers in MENA countries and other countries with a similar institutional setting, whose responsibility is to prescribe proper corporate governance structures to guarantee that shareholders are protected.

The author contributes to the still limited research on the impact of audit committee independence on earnings management since the extant literature focuses on the Anglo-Saxon countries. The author tries to provide new insights into this relationship within the developing context, the case of MENA countries that have a different environment compared to advanced markets. To the best of the author’s knowledge, this study is among the pioneering efforts to investigate the influence of audit committee independence on earnings management in MENA countries.

This study attempts to quantify the degree of independence of Central Bank of India from both legal and behavioural contexts over the period 1990–1991 to 2018–2019, a period encompassing major developments in the operation and regulation of Reserve Bank of India (RBI).

We followed Jasmine et al. (2019) to calculate the magnitude of de jure independence of RBI and for de facto independence, “turnover rate (TOR) of CB governor” as proposed by Cukierman et al. (1992) is applied.

The results report that the legal autonomy of RBI increased specifically after the reforms and post formulation of Monetary Policy Committee (MPC). However, the actual independence of RBI remains more or less in line within the critical threshold limit of 0.2.

The study proposes effective implementation of laws and procedures designed to promote the independence of Central Bank of India imperative for an effective monetary operation along with a coordinated fiscal policy.

Targeted study of a particular central bank on its “independence” aspect in general and of the Reserve Bank of India in particular has not been attempted as on date. It is to this end that the present study contributes.

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2023-0098.

Independence is the cornerstone of the auditing profession. Even so, it is often assumed that acquiescing to the audit client when a disagreement occurs is more beneficial to the auditor-client relationship than asserting one’s independence (e.g., see Wang & Tuttle, 2009). We look more closely at the issue in the context of auditor-client management disagreements as recalled by experienced auditors.

We find that for most disagreements in which the auditor did not make any concession at all, the auditor-client relationship was either unaffected or strengthened. We find that a client’s use of pressure tactics did not appear to influence whether or not the auditor made a concession, but that a client’s use of pressure tactics, was associated with damage to the auditor-client relationship. The importance of the issue causing a disagreement was positively associated with the likelihood of the auditor staying with his/her initial position.

Mandatory auditor firm rotation (mandatory rotation) has been a controversial issue in the United States for many decades. Mandatory rotation has been considered at various times as a means of improving auditor independence. For example, in the United States, the Public Company Accounting Oversight Board (PCAOB) has considered mandatory rotation as a solution to the independence problem (PCAOB, 2011) and the European Parliament approved legislation that will require mandatory rotation in the near future (Council of European Union, 2014). The concept of implementing a mandatory rotation policy has been encouraged by some constituents of audited financial statements and rejected by other constituents of audited financial statements. Although there are apparent pros and cons of such a policy, the developmental process of such a policy in this country has not necessarily been an open-democratic, objective process. Universal mandatory rotation may or may not be the ideal solution; however, an open-democratic, objective process is needed to facilitate the development of a solution that considers the needs of all major stakeholders of audited financial statements – not simply accounting firms and public companies, but also investors. The purpose of this paper is to critically examine key issues relating to mandatory rotation and to encourage and stimulate future research and ongoing dialogue regarding this issue, in spite of efforts by certain constituents to silence the issue. This paper provides an overview of the various reasons, including practical, theoretical, political, and self-motivated reasons, why a mandatory rotation policy has not been implemented in the United States in order to address the potential conflict of interest between the auditor and client. This paper will also discuss how some deliberations of mandatory rotation have been flawed. The paper concludes with a summary of key issues along with two approaches for regulators, policy makers, and academics to consider as ways to improve the process and address auditor independence. The authors are not advocating for any specific solution; however, we are advocating for a more objective, unified approach and for the dialogue regarding auditor rotation to continue.

This chapter examines corporate governance–related financial reporting issues in the context of globalization. Over the past few decades, the process of globalization has substantially altered the fields of corporate governance and accounting. More specifically, Anglo-American models of corporate governance and financial reporting have received increasing momentum in emerging economies, including China. However, a review of relevant studies suggests that there is limited research examining the implementation of Anglo-American concepts in various countries regardless of their growing acceptance. This monograph extends the existing literature by comprehensively investigating the adoption of internationally acceptable principles and standards in China, the largest transitional economy that has different institutional context from Anglo-American countries. In addition, the review has a number of implications for developing the theoretical framework, and determining the research methodology for the monograph.

Auditing textbooks include summary level coverage of the American Institute of Certified Public Accountants (AICPA) Code of Professional Conduct, but textbook coverage is too brief to support a strong understanding of auditor independence. Independence rules have the force of professional law for the independent auditor (PCAOB, 2015). Threats to firm independence can arise from events and circumstances such as investments in the client, loans from the client, past-due fees, contingent fees, deposits in the client, gifts and job offers. Student test results from a five-year rotation of alternative auditor independence lecture support materials demonstrate that using the actual AICPA Code of Professional Conduct reduces student performance. However, this drag on student performance was mostly offset by the positive impacts of simultaneous use of an independence decision tree developed for this chapter and tested as a teaching material for classrooms use.

This paper takes position against the spread of the free-market logic in the domain of accountancy, where free market is often viewed as undeniably benefiting society and users of financial statements. A key moment that paved the way for the growing influence of the free-market logic in accountancy resides in the elimination of institutional ethics rules prohibiting direct and uninvited solicitation of clients, which occurred in the 1970s. Importantly, it was (some would say quite naïvely) assumed that auditors would be able to maintain their independence from auditees in a surrounding climate emphasizing market competition and individualism. However, research indicates that before the collapse of Enron and Arthur Andersen, a number of auditors were significantly concerned about auditor independence being undermined in actual practice. Yet, their concerns were kept largely in the dark. It took the billion-equity collapse of Enron and the powerful imagery related to the shredding of documents by its external auditor Arthur Andersen, as well as the collapse of WorldCom a few months afterwards, to bring to light the undermining of auditor independence in the public arena and to create a momentum in favour of reforming authoritative regimes of auditor independence, therefore constraining to some extent the influence of the free-market logic in accountancy. My main argument is that these collapses could perhaps have been avoided if auditors’ dissenting and negative points of view on auditor independence had been voiced, heard, and appropriately taken into account by accounting organizations and regulatory bodies. Accordingly, it is recommended that channels be established for practising auditors to communicate concerns that emerge from their daily experiences and which cast doubt on the conceptual foundations of financial auditing. Establishing such mechanisms may help to guard against the excesses of the free-market logic; the latter definitely should not reign unchallenged.

This paper has two purposes. The first is to demonstrate that over time, and in a number of professional and academic places, the concept of auditor independence has been contested; that is, there have been different concepts of auditor independence within different time periods, and even when there appears to have been consensus on the meaning of auditor independence, there have been significant debates about auditor independence. The second purpose of the paper is to advocate a complete reconsideration of the concept of auditor independence; one which would move us towards the idea that auditors should be prohibited from acting as advocates in any way on behalf of their clients, and that client management should have no ability whatsoever to determine the audit fee or the scope of audit engagement. These are controversial ideas. They are meant to be so.

The debate over an auditor's ability to remain independent while simultaneously providing nonaudit services to the audit client has a long history. In recent years, several factors have combined to heighten regulators’ concerns about this issue. This study uses a case methodology research design to analyze the testimonies given by financial statement users at the Securities and Exchange Commission's (SEC, 2000b, 2000c, 2000d, 2000e) Independence Hearings in relation to this debate. The analysis is framed by the principle of user primacy. Findings indicate that changes from the SEC's initial proposal to final rule on independence are more closely aligned with preparers’ than users’ preferences, despite claims to the contrary.