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A test of the auditor reliability framework using lenders’ judgments

This is a research report on A test of the auditor reliability framework using lenders’ judgments uploaded by Jasmine Pvk in category: All Documents »  Accounts »  Quantitative Techniques section of our research repository.
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Tags: Descriptive results and measure validation , Objectivity effects on auditor reliability
Taylor et al. (2003) challenged the longstanding notion that independence is the capstone
of the audit profession by proposing a conceptual framework that emphasizes reliability,
rather than independence, as the professional endgame for auditors. Although the reliability
framework has attracted attention from policymakers, it has not been tested empirically
in an audit context to assess its validity from a user’s perspective. The objective of this
study is to test the auditor reliability framework and its formative ethical constructs
(i.e., integrity, expertise, independence, objectivity, and reliability) with a sample of 168
commercial lenders. We also extend the reliability framework to examine the extent that
perceived auditor reliability affects lenders’ judgments of financial reporting reliability and
default risk in a hypothetical lending scenario. Finally, we evaluate the extent that lenders’
judgments are affected by auditor provision of nonaudit bookkeeping and payroll services
to a prospective borrower in violation of current independence rules. The results provide
strong empirical support for the relations predicted in the reliability framework. Structural
equation model results indicate that auditor integrity is the foundation of the framework,
directly affecting lenders’ assessments of auditor expertise, independence, objectivity, and
reliability. Further, although integrity and objectivity directly affect perceived auditor reliability,
independence and expertise only affects reliability indirectly through its impact on


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