Management advisory services and perceived audit independence: Evidence from an experiment

Abstract

This paper reports the results of an experiment at the University of Arizona in which the perceived independence of certified public accounting (CPA) firms which provide management advisory services (MAS) to audit clients, was measured by auditing students. The results indicate that there are situations in which the CPA firm may be seen to be most (or least) independent. Also, the feared negative impact of MAS fees on perceptions of audit independence may have been exaggerated. Finally, the paper suggests an intra-CPA-firm organizational structure as a viable, non-regulatory alternative towards addressing the problem of apparent lack of independence when CPA firms render MAS to audit clients.