Abstract
Purpose - Auditor independence is fundamental to public confidence in financial reporting and the auditing profession. The study aims to provide further understanding of the factors influencing auditor independence from the perspective of commercial loan officers. Loan officers formed the sample as they are relatively sophisticated financial statement users who would understand the importance of audit report and the issues related to auditor independence.
Design/methodology/approach - The study examines the perceptions of commercial loan officers in Malaysian-owned commercial banks and a total of 86 officers responded to the self-administered questionnaire.
Findings - Results indicate that smaller audit firms, audit firms operating in a higher level of competitive environments, audit firms serving a given client over a longer duration, larger size of audit fees, audit firms providing managerial advisory services, and, the non-existence of an audit committee, are perceived as having a higher risk of losing independence. Audit firm size appears to be the most important factor that affects the auditor independence, followed by tenure, competition, audit committee, audit firms providing managerial advisory services and size of audit fee.
Originality/value - The paper provides important insights into the factors affecting auditor independence and contributes towards better understanding on the ways to improve the confidence in financial reporting and credibility of the auditing profession.