About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline
LOG IN
LOG IN

61 Ohio St. L.J. 1597 (2000)
The SEC and MDP: Implications of the Self-Serving Bias for Independent Auditing

handle is hein.journals/ohslj61 and id is 1609 raw text is: The SEC and MDP: Implications of the Self-Serving Bias for Independent Auditing ROBERT A. PRENTICE* Huge accounting firms, seeking to become one-stop shopping centers for clients, wish to add legal services to the audit, tax, information consulting, financial planning, litigation support, and other services they already provide-a phenomenon known as multi-disciplinary practice (MDP). MDP can aggravate problems already plaguing objectivity and independence in the auditing profession. Theoretically, auditors must be objective and independent. However, there is a large body of behavioral studies demonstrating that, overwhelmingly, people tend to behave inequitably if it benefits them and they think they can get away with it-a behavior known as the self-serving bias. Professor Prentice examines the self-serving bias by surveying the literature from psychology, decision theory, behavioral finance, and behavioral economics, and examines its operation in relevant analogous fields, such as law, medicine, and investment banking. Professor Prentice then applies what we know about the self-serving bias to the special problems of auditors' mandatory objectivity and independence. It turns out that auditors, no less than the rest of us, behave in accordance with the self-serving bias: for example, they are reluctant to issue qualified opinions and reluctant to refisse their clients' requests for improper accounting treatment. Moreover, they are even more reluctant to act against the interests of financially healthy clients and more likely to act in self-defensive ways with respect tofinancially troubled clients. Professor Prentice concludes by discussing appropriate SEC responses to the dangers created by the self-serving bias in auditors who are subject to the exacerbating effects of an MDP. * University Distinguished Teaching Professor and Ed & Molly Smith Centennial Professor of Business Law, University of Texas at Austin.

What Is HeinOnline?

HeinOnline is a subscription-based resource containing thousands of academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.



Short-term subscription options include 24 hours, 48 hours, or 1 week to HeinOnline.

Purchase Access

Contact us for annual subscription options:

Contact Us

Already a HeinOnline Subscriber?

Log In

profiles profiles most