An empirical analysis of bank loan officers' perceptions of independence, objectivity and reliability when the auditing firm also provides specified tax services to nonpublic entities

This study explores bankers' perceptions of whether external auditors remain independent and objective, and view the audit report as reliable when the auditor also performs tax compliance services for the audit client and company executives. The study used a case experiment and questionnaire. I employed a between-subjects experimental design of various combinations of tax compliance and audit services. I randomly selected bank loan officers from a commercial prepared list and mailed one of three experimental scenarios and a questionnaire to each participant.;Experimental findings indicate that participants perceive the attest auditor to be less independent and objective when the auditor also performs tax compliance services to the audited entity. The participants also perceive the attest auditor to be less independent and objective and they view the audit report as less reliable when the attest auditor also performs tax compliance services for the audited entity and performs tax compliance services for executives of the auditing entity.;Questionnaire results indicate that the bank loan officers believe attest auditors should be allowed to provide tax compliances services to the client even though they may be auditing their own work. The questionnaire results also indicate that bank loan officers think that reliability of the auditor's report would not be enhanced if the auditor provided tax compliance services to the client and the client's executives they also audit.