Auditors' Employment With Clients And Interaction Their Former CPA Firm

A number of audit professionals accept employment with audit clients upon leaving the audit firm. This practice has become an issue of concern to the Securities and Exchange Commission (SEC) and the Independence Standards Board (ISB) because of its potential impact on auditor's independence. Prior research has studied the perceptions of auditors and users of accounting information on this issue. Both the ISB and prior research have identified rank of the auditor at the time of leaving the firm, time elapsed since leaving, and familiarity with the audit firm's techniques as factors that affect those perceptions. This article provides empirical evidence related to this issue by examining the perceptions of clients who are audit firm alumni. Results indicate that a greater proportion of alumni disagreed, rather than agreed, that they would be able to resolve disagreements with their auditor more easily if their former firm served as the auditor. Further, male alumni and those who worked in the audit area were more likely to resolve disagreements with their auditor if the auditor was from their former CPA firm. However, two of the factors identified by the ISB (rank and time elapsed since leaving the firm) were not significantly associated with the responses.