How Former Auditors Take Their Biases With Them
Once they are on the other side of the desk, they can undermine audit quality and independence
CPAs who leave their positions as auditors to become accountants in private industry often find themselves on the other side of the audit engagement as auditees. Here, they have the power to shape the engagement in ways that jeopardize audit independence.
Researchers from Smith School of Business, Queen's University, conducted a study of 36 auditees with former experience as auditors. They found that former auditors are able to draw on the expert knowledge and social capital to actively influence the audit engagement in a number of ways. In light of the current regulatory ambiguity around this specific form of bias, the researchers propose that accounting firms and clients alike develop their own internal methods for curbing such bias. The first step is growing awareness among their audit teams about the potential of these interactions to reduce audit quality and independence.
The paper is written by researchers Bertrand Malsch, PricewaterhouseCoopers/Tom O'Neill Fellow of Accounting at Smith School of Business, and Laurence Daoust, assistant professor at HEC Montréal and a former Ph.D. student at Smith.