Title: An investigation into the effect of audit firm size, auditor tenure, institutional ownership, board characteristics on auditor independence

Authors: Khaldoon Ahmad Al Daoud

Addresses: Department of Accounting, Faculty of Economics and Administrative Sciences, Yarmouk University, Jordan

Abstract: The independence of an auditor is a crucial issue because of its potential impact on audit quality. This study examines the effect of audit firm size, auditor tenure, institutional ownership, board independence, and board diversity on the audit quality. The sample comprised 52 listed service firms on the Jordanian Stock Exchange, whose data were obtained for the years from 2013 to 2016, and 208 firm-year observations were involved in the analyses process. In this study, auditor independence served as the proxy for audit quality. The results reveal that audit firm size and institutional owners and board independence significantly and positively influence audit quality. The results reveal that companies with a higher proportion of institutional ownership and independent members of the board and being audited by a Big 4 firm are more likely to maintain the independence of the external auditor. However, auditor tenure and board diversity had no significant relationship with auditor independence. The results could be useful for the management of companies that are interested in enhancing the quality of audit work in their companies.

Keywords: auditor independence; corporate governance; ownership structure; Jordan.

DOI: 10.1504/IJMP.2020.108302

International Journal of Management Practice, 2020 Vol.13 No.4, pp.462 - 477

Received: 14 Jan 2019
Accepted: 10 Jul 2019

Published online: 20 May 2020 *

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