William E. Shafer
Pepperdine University
Alice A. Ketchand
Sam Houston State University
Roselyn E. Morris
Southwest Texas State University
Abstract: This paper argues that independent auditors have lost sight of their obligation to be truly impartial, and have increasingly adopted an attitude of client advocacy. Historically, auditors were expected to go beyond merely passing judgment on whether client accounting methods are acceptable under GAAP, and to judge whether the principles adopted are the most appropriate under the circumstances. However, recent evidence suggests that auditors have abandoned this objective in favor of advocating client-preferred principles. A survey of auditors from small CPA firms indicates that advocacy of client-preferred principles is generally considered appropriate, and is very likely to occur in practice. The results also indicate that engagement risk, or the risk that the firm will be harmed by aggressive behavior, affects judgments of both the appropriateness and likelihood of such actions. These findings suggest that auditors have adopted an ideology of client advocacy, within the constraints of engagement risk.
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