Auditor independence, self-interested behavior and ethics: some experimental evidence

Haim Falk, Bernadette Lynn, Stuart Mestelman, Mohamed Shehata 

Journal of Accounting and Public Policy 18 (1999) 395-428

Abstract

Our paper presents the results obtained in a laboratory environment in which subjects revealed their beliefs about an uncertain state of the world and then participated in a simple task which required them to report on whether the report of a second party is consistent with the subjects’ beliefs. Because maintaining prior judgements (audit independence) which were in disagreement with the second party’s decision (a potential

for a qualified audit opinion) were costly to the subject, a situation was created in which the subject might compromise her beliefs at a price. The results suggest that amoral, selfinterested profit-maximizing behavior does not generally characterize the subjects in this experiment. Furthermore, subjects compromise their beliefs less often, i.e., breach independence, the higher their scores on a Defining Issues Test, but more often, the greater the cost of adhering to their beliefs. © 1999 Elsevier Science Inc. All rights reserved.

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