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Political connections: a threat to auditor independence?

Author

Listed:
  • Effiezal Aswadi Abdul Wahab
  • Mazlina Mat Zain
  • Rashidah Abdul Rahman

Abstract

Purpose - – The purpose of this paper is to examine whether political connections further impair auditor independence by investigating the relationship between non-audit fees and audit fees and as to whether political connections moderate such relationship. Design/methodology/approach - – This study employs panel regression analysis. The panel data set consists of 379 firm-year observations for three years from year 2001 to 2003. Findings - – Based on 379 firm-year observations for the period of 2001-2003, grounded on two proxies of political connections namely politically connected firms and the proportion of Bumiputras directors, the authors find a positive and significant relationship between non-audit fees and audit fees, and the relationship becomes weaker, only for Bumiputra-dominated firms connected firms. Originality/value - – This study contributes to the extant literature by examining the role of political connections in the context of auditor independence. In addition, this study is conducted in Malaysia, which provides a unique institutional environment with the existence of political connections that is built on ethnic grounds.

Suggested Citation

  • Effiezal Aswadi Abdul Wahab & Mazlina Mat Zain & Rashidah Abdul Rahman, 2015. "Political connections: a threat to auditor independence?," Journal of Accounting in Emerging Economies, Emerald Group Publishing Limited, vol. 5(2), pages 222-246, May.
    • Handle: RePEc:eme:jaeepp:jaee-03-2012-0013
    DOI: 10.1108/JAEE-03-2012-0013
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    More about this item

    Keywords

    Audit fees; Non-audit fees; Political connections; G34; G38; M41; M42;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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