Exploratory Experimental Evidence on Independence Impairment Conditions: Aggregate and Individual Results



Date of this version


Document Type



Audit fee; Auditor reporting; Cooperation; Moral reasoning; Professional ethics


Auditor independence and ethical behavior are closely related and both are influenced by economic incentives. This paper reports some exploratory results from experimental markets that investigate three general economic conditions that have been identified by the theoretical literature as necessary for an impairment of independence. Consistent with predictions, a lower frequency of independence impairment (auditor misreporting) was observed when any of the necessary conditions was absent than when all three conditions were present. However, some subjects maintained their independence even when all three necessary conditions were present, while others exhibited an impairment of independence in the absence of one or two of the three necessary conditions. These results document that the joint existence of all three conditions cannot be interpreted as strictly sufficient for an impairment of independence, and that each condition cannot be interpreted as strictly necessary. One possibility is that the variation in individual behavior may be attributed to individual differences in moral reasoning. Future research could address this possibility by using the Defining Issues Test to measure individuals' levels of ethical cognition in an attempt to explain variation in their reporting behavior in experimental markets.

Published in

Behavioral Research in Accounting

Citation/Other Information

Behavioral Research in Accounting, 1996, Vol. 8 (Supplement), pp. 173-195.