Perceptions of External Auditors’ Independence in South African Private Audit Firms

Abstract

Auditor independence is a pivotal principle essential for ensuring the integrity and reliability of financial reporting. This research paper explores perceptions of external auditors' independence within private audit firms in South Africa, particularly in light of recent accounting scandals that have eroded trust in the audit profession globally and within the country. In this academic research paper, we systematically test a hypothesis across multiple chapters to investigate perceptions of external auditors’ independence within South African private audit firms. Specifically, we explore how the provision of non-audit services, audit tenure, and the employment of former auditors by audit clients may influence perceptions of independence. The study employs a quantitative methodology and gathered data via an online questionnaire distributed to 300 respondents associated with the South African Institute of Chartered Accountants (SAICA). The sample comprised qualified chartered accountants, individuals eligible to register as chartered accountants, and trainees enrolled in a SAICA-accredited training program. This sample was accessed through email, WhatsApp, and LinkedIn to ensure a comprehensive reach within the professional community. Contrary to the typical concerns expressed in existing literature, the findings suggest that providing non-audit services, extended audit tenure, and employment of former auditors by audit clients can positively impact perceptions of auditor independence. These results highlight the auditors' capability to maintain independence of mind and appearance despite potential conflicts of interest. This study underscores the need to adhere to stringent regulatory frameworks and professional guidelines supporting auditor independence. Further research should also investigate these relationships more deeply, potentially leading to refined strategies that safeguard auditor independence and reinforce public trust in the auditing profession in South Africa.