The Effect of Religiosity & Morality Interaction on the Degree of Auditor Independence: The Case of Egypt

Abstract

The problem of auditor independence has been (and still) a long debatable issue. Major failures to maintain independence were attributed to extended auditor client relationship. The theory of Social Interactionism claims that, auditor independence is theoretically not only a matter of so called socioeconomic/Meso-level factors (raising the interdependence effect between the auditor and the client) but it also tends to be a macro as well as micro levels factors of social interaction. Due to such non-linear relationship, this research intends to examine the effect between different levels of interactions (with a focus on the micro level representation and the degree of auditors’ religiosity, i.e. religious commitment) on the degree of auditors’ independence (in different situations at auditors’ moral development). The main objective of the paper is to determine the interactive effect between religiosity and moral development on the degree of auditor independence. This main objective is to be achieved through three sub-objectives. First is to test whether there is a main effect of moral development on the degree of auditor independence under different economic conditions of clients. Second is to test, whether there is a substantial effect of auditors’ degree of religiosity on the degree of auditor independence, and the interactive effect between religiosity and moral development on auditor independence at different economic conditions of clients. This statistical experimental research was conducted using a questionnaire at a sample of 190 auditors working in Egypt. This research uses the mixed factorial ANOVA technique to determine the interactional effects of the previously listed independent variables on the degree of auditor independence assessed by his/her likelihood to accept client’s materially misstated reported information using eight (2x2x2) scenarios. The findings of the paper demonstrate that religiosity can affect the degree of auditor independence only at clients’ weak economic conditions, and the same applies to morality as well. There is no evidence that there is an interactive effect between the religiosity and moral development that affect the degree of auditors’ independence. The originality of this research rests being the first experimental designed research, measuring the degree of auditor independence, in Egypt rather than the classical perceptional assessment approach. Second, it is the first study to test the interactive effect between religious orientation/commitment rather than religious affiliation and morality on the degree of auditor independence.