With the forthcoming publication of Responsible Finance and Accounting: Performance and profit for better business, society and planet with publishers Routledge, a spotlight on the featured research of book contributors Professors Anastasios Elemes, ESSEC Business School, and Jeff Zeyun Chen, Neeley School of Business, Texas Christian University
Saints or Sinners? Politically connected auditors and their audit quality, a spotlight on the research of Professors Anastasios Elemes and Jeff Zeyun Chen. By Tom Gamble.
Some of us might be surprised to learn that audit firms often have links with politicians and their political parties. And we might also tend to think that these connections pose a risk to audit firm integrity. Not so. Or at least, not so obvious.
Profs Elemes and Chen’s research in the USA looks into the question, finding that audit firms there establish political connections both at office level in addition to lobbying at national level. “On average, our findings reveal that there is a positive association between auditors’ political connections and their audit quality,” affirm Elemes and Chen, as audit firms tend to uphold and exceed professional standards of work in such a relationship. But there’s a hitch. “On the other hand,” state the researchers, “politically connected auditors are likely to compromise their independence for politically connected clients.”
This is important – for Big 4 accounting firms serve as information gatekeepers to the capital markets. “And these expectations are unlikely to be met if connected auditors compromise their independence for clients with political ties,” say Profs. Elemes and Chen. ;
They would like to see tighter disclosure requirements for auditors’ lobbying activities in order to contain the risk of conflict of interest. As well as an increase in regulatory scrutiny for the audits of politically connected auditors.
For Profs. Anastasios Elemes and Jeff Zeyun Chen it is perhaps not a question of whether audit firms are distinctly saints or sinners – but a little of both. The overriding issue remains that of politically connected auditors’ being able to maintain their audit quality and impartiality despite the temptation of too close, too political, and too influential a relationship.
Discover From Lobby to the Audit Office: Big Four accounting firms and political links – Profs. Elemes and Chen’s research insight included in the new book:
Responsible Finance and Accounting: Performance and profit for better business, society and planet
- Link up with Anastasios Elemes and Jeff Zeyun Chen on LinkedIn
- Browse and connect with Prof. Elemes’s website
- Read a related article: Accounting firms: Can they influence companies’ inherent motivation to be good?
Learn more about the Council on Business & Society
The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
Member schools are all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
- ESSEC Business School, France-Singapore-Morocco
- FGV-EAESP, Brazil
- School of Management Fudan University, China
- IE Business School, Spain
- Keio Business School, Japan
- Stellenbosch Business School, South Africa
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.