The paper examines the role and importance of auditor independence as perceived by various interested parties in the United Kingdom. A questionnaire postulating 29 auditor-client relationships was sent to a sample of both the preparers of and the users of financial statements. They were asked whether they thought auditor independence might be impaired for each relationship and what impact they thought this might have on investment and lending decisions. The results showed that non-independence was perceived by the respondents to impair investment and lending decisions. It was also found that there were significant differences in the perceptions of auditor independence, and the importance thereof, between the responses of the preparers of financial statements and the responses of the users of financial statements. The results showed that while the views of accountants working in professional practices agreed quite closely with the ethical guidelines on auditor independence published by the British Institutes of Chartered Accountants, the users of financial statements were much more skeptical of auditor independence.

The research involved measuring the information content of qualified audit reports on published accounts. The market model was used to measure the abnormal returns associated with various "types" of qualification. It was found that some types of audit qualification had a significant impact on investment decisions while others had very little. There was found to be no relationship between the accounting firm qualifying the accounts and the abnormal returns. The findings suggest that more information on the nature of the audit qualifications should be given.

An experiment Was conducted where practicing financial analysts provided risk and return judgments on 30 equity securities. The ability of financial analysts to subjectively express the relative emphasis they place on the available cues when generating their judgment evaluations was assessed by three alternative measurement methods. The results indicate the analysts exhibited a relatively high degree of self-insight since their subjective indications of cue importance were consistent with the models and outputs of their judgment policies.

[An experiment was conducted where practicing financial analysts provided risk and return judgments on 30 equity securities. The ability of financial analysts to subjectively express the relative emphasis they place on the available cues when generating their judgment evaluations was assessed by three alternative measurement methods. The results indicate the analysts exhibited a relatively high degree of self-insight since their subjective indications of cue importance were consistent with the models and outputs of their judgment policies.]

Family firms are characterized by less separation between ownership and control (Type 1 agency problem), but greater conflict of interest between controlling insiders and non-controlling outside investors (Type 2 agency problem). Although strong board governance is known to decrease the Type 1 agency problem, its effectiveness in mitigating the adverse consequences of the Type 2 agency problem has not been well documented in the literature. We show that strongly governed family firms are more likely to choose specialist auditors and exhibit higher earnings quality than nonfamily firms. Weakly governed family firms demand lower audit effort and exhibit earnings quality that is no different from that of nonfamily firms. Within family firms, we show that strongly governed family firms choose higher quality audits in the form of a greater use of specialist auditors and higher audit efforts, and exhibit higher earnings quality than other family firms. These findings provide consistent evidence that strong board governance can effectively mitigate the adverse consequences of the Type 2 agency problem on financial reporting and transparency in family firms. Data Availability: The data used are available from the public sources identified in the study.