This study investigates if auditors who feel accountable to management (as opposed to the audit committee) are more susceptible to pro-client bias after using a disclosure checklist. We theorize that the use of a disclosure checklist, even though it is uninformative about the aggressiveness of the accounting methods used, can influence auditors’ judgments of the acceptability of aggressive reporting by inducing a less critical state of mind. We propose that this less critical state of mind is reflected in higher levels of pro-client bias, particularly when management is the appointing party. Our experimental data for two cases, obtained from experienced auditors working at a Big Four audit firm, support this prediction. Our findings imply that threats to auditor independence are more subtle than has often been assumed.

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Series ERIM Top-Core Articles
Journal The European Accounting Review
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van Rinsum, M, Maas, V.S, & Stolker, D. (David). (2017). Disclosure Checklists and Auditors’ Judgments of Aggressive Accounting. The European Accounting Review, 1–17. doi:10.1080/09638180.2017.1304228