An examination of auditor independence issues from the perspectives of UK Finance Directors

This paper presents an analysis of the opinions of U.K. Finance Directors - also known as Chief Financial Officers (CFOs) in North America - on factor s which may effect the roles and responsibilities of the external auditor t o the organization. A number of proposals have been put forward over the ye ars to enhance auditor independence and these were treated as dependent var iables in this study. A questionnaire was mailed to 3 000 named Finance Dir ectors and 776 useable replies were received. From the responses to the que stionnaire, three independent variables were identified: opinions on the va lue of the audit in general; opinions on the impact of the audit on the org anization; and the relationship between the Finance Director and the audito r. The results reveal that those Finance Directors concerned in general abo ut the value of auditing favoured the banning of non-audit work and the rot ation of auditors. In addition, those Finance Directors with good relations hips with their external auditors preferred the banning of non-audit servic es and the rotation of external auditors. Those respondents favouring the s eparate regulation of auditors were also concerned about the impact of the audit on the organization. The results of this study shed some light on the sensitivity of U.K. Finance Directors to ethical issues regarding external auditor independence.