Table Of ContentSTATUTORY
AUDITORS’
INDEPENDENCE
IN PROTECTING
STAKEHOLDERS’
INTEREST
An Empirical Study
Mitrendu Narayan Roy
Siddhartha Sankar Saha
Statutory Auditors’ Independence in Protecting
Stakeholders’ Interest
Mitrendu Narayan Roy
Siddhartha Sankar Saha
Statutory Auditors’
Independence in
Protecting
Stakeholders’
Interest
An Empirical Study
Mitrendu Narayan Roy Siddhartha Sankar Saha
Goenka College of Commerce and Business Department of Commerce
Administration University of Calcutta
University of Calcutta Kolkata, West Bengal, India
Kolkata, West Bengal, India
ISBN 978-3-319-73726-3 ISBN 978-3-319-73727-0 (eBook)
https://doi.org/10.1007/978-3-319-73727-0
Library of Congress Control Number: 2018934988
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Preface
The authenticity and reliability of financial information of a corporate
enterprise expressed by the statutory financial auditors are of incredible
significance to stakeholders. When companies manipulate their financial
statements the result can lead to corporate accounting scandal. Accounting
scandals have become a crucial issue since the shocking revelations of
financial difficulties at different companies across the globe, such as
Enron, WorldCom and Satyam. When a scandal is revealed, it brings
serious hardship to both stakeholders and corporate enterprises. In this
context, questions emerge about the sincerity, integrity and indepen-
dence of the statutory auditors involved. Auditor negligence and an
alleged lack of independence from company management in such
accounting scandals ultimately impairs stakeholder interests and destroys
their trust in the validity of the financial information presented to them.
Questions arise as to whether in these scandals auditor independence was
impaired to some extent and how it can be sustained in future for the
safeguarding of stakeholder interests.
The concept behind this book was developed out of a lively discussion
between its authors. Dr. Siddhartha Sankar Saha, Associate Professor of
Commerce at the Department of Commerce at University of Calcutta,
was undertaking a major research project on a related area funded by the
University Grants Commission (UGC) in which Dr. Mitrendu Narayan
Roy was Project Fellow. Dr. Roy conveys his sincere gratitude to his
v
vi Preface
research mentor Dr. Saha for giving him the opportunity to pursue
research under his supervision in this critical area and for allowing him to
incorporate a portion of research materials related to his research project
in this book. Without Dr. Saha’s guidance, encouragement and inspiring
and wise advice, the completion of this book would not have been
possible.
Throughout this research, the authors have received valuable advice
and suggestions from several different quarters. We are pleased to put on
record our sincere gratitude to teachers and colleagues in the Department
of Commerce at the University of Calcutta for their contribution and
endorsement. We are also deeply indebted to many of our respected
teachers in the Department of Statistics at the University of Calcutta, the
Indian Institute of Social Work and Business Management (IISWBM)
and the Indian Institute of Management (IIM) in Kolkata for their bless-
ings and notable advice.
Dr. Roy conveys his sincere gratitude to the UGC for awarding him a
junior research fellowship and subsequently a senior research fellowship
for completing the work. We owe our gratitude to the learned authors of
India and abroad whose scholarship has informed the present work. We
acknowledge with thanks the cooperation of the librarians and staff of a
several libraries in Kolkata for allowing us to consult relevant books,
research papers and other electronic materials for our study. These include
University of Calcutta Central Library, St. Xavier’s College Central
Library, American Council Library, British Council Library, B.C. Roy
Memorial Library of IIM.
We convey our sincere thanks to the partners or managers of select
reputed chartered accounting firms, for example the Kolkata branches of
PricewaterhouseCoopers (PwC) India, KPMG, Ernst & Young, and oth-
ers, for their valuable suggestions in designing the questionnaire for the
current study. We also acknowledge the guidance given during the dis-
cussion on contemporary issues related to our present study by chartered
accountants, cost and management accountants, academics and corpo-
rate executives. We thank our respondents for giving thoughtful opinions
in the questionnaire. We extend our best wishes to friends and colleagues
for their support and encouragement.
Prefac e vii
We are also thankful to our parents and beloved family members for
their uncounted sacrifices in the completion of this book.
Kolkata, India Mitrendu Narayan Roy
October 2017 Siddhartha Sankar Saha
Contents
1 Introduction 1
1.1 Preamble 1
1.2 R esearch Problem 3
1.3 R esearch Questions 4
1.4 R eview of Literature 5
1.5 Objectives of the Study 16
1.6 R esearch Methodology 17
1.7 Th e Scheme of Work 22
2 Regulatory and Ethical Framework for Statutory Auditors’
Independence: A Review in Select Countries including
India 25
2.1 I ntroduction 25
2.2 R egulatory and Ethical Framework for Statutory Auditor
Independence: Background 26
2.3 P ast Studies 30
2.4 O bjectives 33
2.5 Research Methodology 33
2.6 R egulatory and Ethical Framework for Statutory Auditor
Independence in Select Countries including India 35
ix
x Contents
2.7 R egulatory and Ethical Framework for Statutory Auditor
Independence: A Comparative Review in Select
Countries 84
2.8 C onclusions 118
3 Statutory Auditors’ Independence in Select Corporate
Accounting Scandals Since 1990: A Comparative Study 121
3.1 I ntroduction 121
3.2 S tatutory Auditor Independence in Accounting Scandal 121
3.3 Past Studies 125
3.4 O bjectives 130
3.5 R esearch Methodology 131
3.6 S tatutory Auditor Independence in Select Corporate
Accounting Scandals: A Comparative Study 136
3.7 Conclusions 169
4 P erceptions of Respondents on Statutory Auditors’
Independence in Corporate Accounting Scandals:
An Empirical Analysis 173
4.1 Introduction 173
4.2 S tatutory Auditor Independence in Corporate
Accounting Scandals 174
4.3 P ast Studies 178
4.4 Objectives 185
4.5 Research Methodology 186
4.6 E mpirical Analysis 207
4.7 C onclusions 283
5 Ethical Responsibility of Statutory Auditors
in the Backdrop of Corporate Accounting Scandals:
An Analysis of Respondents’ Perceptions 287
5.1 I ntroduction 287
5.2 E thical Responsibility of Statutory Auditors
in the Context of Corporate Accounting Scandal 288
Conten ts xi
5.3 Past Studies 289
5.4 Objectives 295
5.5 Research Methodology 296
5.6 Empirical Analysis 301
5.7 Conclusions 352
6 Respondents’ Perceptions on Quality Control Procedures
for Statutory Financial Audit: A Survey 355
6.1 Introduction 355
6.2 Q uality Control Procedures for Statutory Financial
Audit 356
6.3 Past Studies 358
6.4 Objectives 362
6.5 Research Methodology 363
6.6 Empirical Analysis 374
6.7 Conclusions 402
7 Concluding Observations and Suggestion 405
7.1 Introduction 405
7.2 Summary of Findings 405
7.3 Research Limitations 422
7.4 Recommendations 423
7.5 Suggestions for Future Research 425
7.6 Conclusions 426
Appendices 431
Bibliography 481
Index 495
