Essays on auditor independence

Auditor independence is a cornerstone of the auditing profession and the basic principle that underpins the reputation of the auditing profession in the public eye. Indeed, it is the attribute most demanded from auditors by the public. Therefore, the sustainability of the auditing profession depends on how auditors can protect this principle. This dissertation consists of four interrelated essays concerned with auditor independence. Specifically, it examines situations that can threaten and impair auditor independence. In addition, this dissertation also examines several variables that may enhance and protect auditor independence. The first essay aims to examine the impact of social pressures occurring within audit firms on auditors’ judgment in the setting of a society with “high power distance” and “low individualism” cultural dimensions. The social pressures consisted of obedience pressure exerted by an auditor’s superior and conformity pressure exerted by an auditor’s colleague. Moreover, two moderating variables—a multi-dimensional professional commitment and locus of control—were included as moderator variables in the relationship between the social pressures faced by auditors and their judgment. The findings show that obedience and conformity pressures influence auditor judgment. Auditors who face the social pressures will make a judgment that may be even diametrically opposite to the independence principle. The findings also indicate that a multi-dimensional professional commitment and locus of control may potentially influence auditor judgment in a situation with social pressures. The second essay aims to investigate the association of advocacy and familiarity threats caused by auditor fee dependence and auditor tenure on auditor independence based on Finnish data, law, and auditing environment. This essay was motivated by the Green Paper on Audit Policy, published by the European Commission in 2010 that questions whether the maximum fee collected from a client should be regulated and whether consecutive assignments should be limited, among others. Contrary to popular belief, this essay does not find evidence that audit fees and long auditor tenure will jeopardise auditor independence. Therefore, the findings do not support policies to regulate auditor fees or limit auditor tenure in Finland. The third essay aims to examine the effect of client intimidation on auditor independence in an audit-client conflict situation. Intimidation threat is one of five independence threats that are explicitly referenced in the IFAC’s independence framework. Client intimidation was manifested in the client threatening to replace the auditor if the auditor did not adopt the client’s position. In addition, this essay examines the role of auditor’s perceived pressure and multi-dimensions of professional commitment as moderator variables. The findings suggest that auditors who experience client intimidation in an audit conflict situation are more likely to have their independence impaired than those who are in a similar situation but without client intimidation. Moreover, auditors who experience client intimidation perceive higher pressure than those who do not experience intimidation. Finally, auditors’ affective and continuance professional commitment dimensions moderate the relationship between auditors’ perceived pressures and auditor independence. The aim of the fourth essay is twofold. First, it aims to develop a scale for measuring auditors’ reputation awareness. Second, it aims to examine the correlation between the levels of auditor reputation awareness and auditor independence. A seven-item scale was developed as the reputation awareness scale. The findings indicate that the scale consists of one dimension. It also has a level of satisfactory reliability and a high level of validity. The findings show that there is a positive correlation between the level of auditors’ reputation awareness and auditor independence.

Trophic cascades in boreal landscapes: top predator protection on tree seedlings and forest grouse

Changes in the abundance of top predators have brought about notable, cascading effects in ecosystems around the world. In this thesis, I examined several potential trophic cascades in boreal ecosystems, and their separate interspecific interactions. The main aim of the thesis was to investigate whether predators in the boreal forests have direct or indirect cascading effects on the lower trophic levels. First, I compared the browsing effects of different mammalian herbivores by excluding varying combinations of voles, hares and cervids from accessing the seedlings of silver birch (Betula pendula), Scots pine (Pinus sylvestris) and Norway spruce (Picea abies). Additionally, I studied the effect of simulated predation risk on vole browsing by using auditory cues of owls. Moving upwards on the trophic levels, I examined the intraguild interactions between the golden eagle (Aquila chrysaetos), and its mesopredator prey, the red fox (Vulpes vulpes) and the pine marten (Martes martes). To look at an entire potential trophic cascade, I further studied the combined impacts of eagles and mesopredators on the black grouse (Tetrao tetrix) and the hazel grouse (Tetrastes bonasia), predicting that the shared forest grouse prey would benefit from eagle presence. From the tree species studied, birch appears to be the most palatable one for the mammalian herbivores. I observed growth reductions in the presences of cervids and low survival associated with hares and voles, which suggests that they all weaken regeneration in birch stands. Furthermore, the simulated owl predation risk appeared to reduce vole browsing on birches in late summer, although the preferred grass forage is then old and less palatable. Browsing by voles and hares had a negative effect on the condition and survival of Scots pine, but in contrast, the impact of mammalian herbivores on spruce was found to be small, at least when more preferred food is available. I observed that the presence of golden eagles had a negative effect on the abundance of adult black grouse but a positive, protective effect on the proportion of juveniles in both black grouse and hazel grouse. Yet, this positive effect was not dependent on the abundance foxes or martens, nor did eagles seem to effectively decrease the abundance of these mesopredators. Conversely, the protection effect on grouse could arise from fear effects and also be mediated by other mesopredators. The results of this thesis provide important new information about trophic interactions in the boreal food webs. They highlight how different groups of mammalian herbivores vary in their effects on the growth and condition of different tree seedlings. Lowered cervid abundances could improve birch regeneration, which indirectly supports the idea that the key predators of cervids could cause cascading effects also in Fennoscandian forests. Owls seem to reduce vole browsing through an intimidation effect, which is a novel result of the cascading effects of owl vocalisation and could even have applications for protecting birch seedlings. In the third cascade examined in this thesis, I found the golden eagle to have a protective effect on the reproducing forest grouse, but it remains unclear through which smaller predators this effect is mediated. Overall, the results of this thesis further support the idea that there are cascading effects in the forests of Northern Europe, and that they are triggered by both direct and non‐lethal effects of predation.

Tilintarkastuksen riippumattomuuden vaarantavat tekijät

Tämän kandidaatintutkielman tavoitteena oli tutkia, mitkä tekijät vaarantavat tilintarkastuksen riippumattomuuden. Tutkimuksessa tutkittiin riippumattomuuden vaarantavia tekijöitä ja niitä keinoja, joiden avulla tilintarkastajien riippumattomuutta voidaan parantaa. Lisäksi työssä tarkasteltiin, mitkä eri tahot sääntelevät tilintarkastajien riippumattomuutta. Tutkimus toteutettiin laadullista tutkimusmenetelmää käyttäen. Työn teorian ohella käytettiin myös empiiristä aineistoa, joka koostui Big Four -tilintarkastusyhteisöjen tuottamista läpinäkyvyyskertomuksista. Aineisto kerättiin tilintarkastusyhteisöjen internetsivuilta. Tutkimuksen tulosten osalta voidaan sanoa, että tilintarkastuksen riippumattomuudelle uhkia ovat; oman edun-, oman työn tarkastamisen-, asianajon-, läheisyyden- ja painostuksen uhat. Tilintarkastuksen täydellistä riippumattomuutta on kuitenkin mahdotonta saavuttaa, minkä johdosta on pyrittävä vain mahdollisimman objektiiviseen ja riippumattomaan tilintarkastukseen.