Auditor independence and client economic power: qualitative evidence and propositions involving auditors' emotions and moral reasoning

Abstract

This study views auditor independence decision-making as holistic, complex and interpersonal, where human elements including emotions come into play when challenged by a morally intense situation. The idea of emotions affecting auditor independence judgments has had little attention in auditing research. In fact, rationality and emotions cannot be separated because they are part of the human condition, often complimenting each other in decision making. To reflect this view, our interactionist model of auditors’ complex decision making includes Rest’s four-component model, (1) moral sensitivity, (2) moral reasoning, and (3) moral motivation as decision-making processes culminating in moral behavior that denotes (4) moral character. We propose that client management economic pressure is a situation of high moral intensity that sensitizes auditors’ emotions and thus motivates their moral reasoning to make deliberative decisions either to resist (a moral judgment) or accede to client management wishes, showing principled, accommodating or pragmatic character.