The Relationships between Director-Auditor Link and Audit Opinion

The auditor-auditee relationship has become a concern due to its possible effect on auditor’s independence. One common form of relationship is the director-auditor link generated by interlocking directorates. Therefore the objective of this study is to examine the effect of director-auditor link on audit opinion. Analysis is conducted by using Probit regression on a sample of 759 companies listed on the Bursa Malaysia for the year 2007. The results show that the issuance of audit opinion is influenced by the director-auditor link, whereby it is found that auditors have higher possibility to issue unqualified audit opinion to interlink companies (interlocking companies sharing a common auditor). The findings are consistent with the attachment theory which suggests that attachments create mutual dependence and mutual trusts between the parties involved.