The independence, objectively and ethical of the entire accounting profession worldwide have been called into question especially after collapse of Enron. There is a widespread belief that provision of non-audit services (NAS) to audit clients could be a potential threat to auditor independence. Most studies that attempted to investigate the relationship between NAS and auditor independence show a mixed reaction towards impairment of auditor independence. As a sample survey, the present study attempt to measure the perception of Government Linked Companies (GLCs) shareholders in Malaysia towards provision of NAS and its impact on auditor independence. Interesting outcomes have emerged from both the primary and secondary data analysis. Applying dominance analysis on the three factors that are extracted from the factor analysis it is observed that the perception of the shareholders demonstrate a high level of risk of impairment of auditor independence for management services followed by human resources services, and advisory services. Statement based on simulated scenario were also posed to the respondent to measure the auditors independence indirectly. For most of the statement the response is positive indicating the impairment of auditor independence. However the auditor’s tenure the response is more towards negative indicating low risk of impairment of auditor independence. The technique of dummy variable least square estimate is used to test the relationship between audit and non-audit fees and it is found that there is a potential an appearance of impairment of auditor independence when the incumbent auditor jointly provides audit and non-audit services.

Research Team
•  Norhaslinda Zakariya
•  Assoc. Prof. Dr. M. Shanmugam
•  Assoc. Prof. Dr. Mukesh Kumar

Institute: KUTPM