Client-To-Auditor Employment Offers and Auditor Independence in the Post- Sarbanes-Oxley Era

Abstract

Ninety-six nonprofessional investors indicate that public accounting firms’ independence is perceived to be more impaired than non-public firms when the firm audits a client who has offered a job to a member of the audit team. Although perceptions of both firms’ objectivity improve as the strength of the independence safeguards increase, public company auditors are perceived as being more objective than non-public company auditors. These results bolster the argument for unified accounting standards. This study is the first to investigate nonprofessional investors’ perceptions of the issue, despite their prominence in the capital markets.