Independence Standard Board Definition

Cite this article as:"Independence Standard Board Definition," in The Business Professor, updated March 23, 2019, last accessed October 25, 2020,


Independence Standard Board (ISB)  Definition

The Independence Standards Board (ISB) creates standards for public company auditors. The underlying objective is to maintain independence and avoid conflicts of interest in reporting services.

A Little More on What is the Independence Standards Board

The Independence Standards Board ( ISB) was established in May 1997, as a result of the discussions held between the AICPA and SEC.  The Board operation policies are carefully crafted for permitting an open, timely study of all matters relating to the independence of an auditor and also to encourage the public to participate in the procedures of setting up. Numerous security-related laws that were enacted by Congress and managed by the SEC state shows the credibility and integrity of reporting finance related matters to the public.
Structure of ISB

The independence Standard Board is made up of 8 members with an executive director and other committee and supporting staff. It is funded by the SECPS .

The board chairman serves for a tenure of 3 years. The chairman is responsible for the supervision and appointment of all personnel at the Independence Standard Board. The chairman is responsible for the distribution of duties among staffs if the board.

References for Independence Standard Board

Academic Research on Independence Standard Board (ISB)

  • Antecedents and consequences of independence risk: Framework for analysis, Johnstone, K. M., Warfield, T. D., & Sutton, M. H. (2001). Accounting Horizons, 15(1), 1-18. This paper act as a guideline that explains the effect that of incentives on independence risk interactions with situational factors that affect the audit quality. The combination of the effect, irrespective of being direct or indirect, or judgment based decisions involved in complex accounting issues, audit conduct, and Materiality.  Some factors were identified as the influencer of independence risk which includes auditing firm culture, individual auditor, auditing firm policies and regulatory oversights.


  • Auditor independence: A burdensome constraint or core value?, Kinney Jr, W. R. (1999). Accounting Horizons, 13(1), 69-75. This article explains the importance of professional self-regulation as to retaining the valuable economic franchise. It also discussed the need for public orientation concerning the importance of the profession and how the government takes over auditing standards to potentially eroded the public accounting professional commitments to the public opinion. A key characteristic of professional status is self-control, which is the newly created government oversight board PCSOB. The oversight of auditing practice has been fully taken over by the government, which weakens claims to professional status and commitment towards vital work standards.
  • SEC auditor independence requirements, Ryan, S. G., Herz, R. H., Iannaconi, T. E., Maines, L. A., Palepu, K., Schrand, C. M., … & Vincent, L. (2001). Accounting Horizons, 15(4), 373-386. The article is about the analysis of how investor and information intermediaries view an auditors tenure. Using the earning coefficient gathered from the return earning regression as a proxy for an investor view as regards earning quality, we can conclude that earnings in stock rankings became larger within an extended tenure although there was a slight imbalance between the debt rating and the reported earnings during the tenure. Lastly, it was discovered that the past earnings had a significant influence on future earnings prediction.
  • Auditor independence and fee dependence, Craswell, A., Stokes, D. J., & Laughton, J. (2002). Journal of Accounting and Economics, 33(2), 253-275. This study carried out a hypothesis on the fee dependence within the audit firms and offices jeopardy on audit independence. The fee dependence was examined at both the local and national audit firm level. The major focus of the hypothesis was on audit fee dependence and at the same time the control for the effects of non-audit service fee dependence post in the 1989 mergers.  The results, however, show the level of auditor fee dependence that it does not affect the auditor propensity to issue unqualified audit opinions.
  • • ISB’s conceptual framework for auditor independence, Myring, M., & Bloom, R. (2003). The CPA journal, 73(1), 30. In the first quarter of 1999, the blue ribbon committee on improving the efficiency of corporate audit committee released the report it gathered on advances on the practical recommendation that enhances audit committee oversight on corporate financial reporting. This article focus on the ways to improve the process by which the audit committee monitors how the management exercised this unavoidable discretion and reviewed by the independent auditors.
  • The effects of internal audit outsourcing on perceived external auditor independence, Lowe, D. J., Geiger, M. A., & Pany, K. (1999). Auditing: A Journal of Practice & Theory, 18(s-1), 7-26. This article explains the effect of internal audit outsourcing on the external auditor independence. The expansion brought about a concern about the potential lack of independence between the Auditor and the client requesting for the service of the auditor.
    Categorically, an auditor performance of management functions had a negative impact on its user’s perceptions of auditor independence and financial statements reliability. The findings gathered in the study supported the AICPA’s Current position on internal audit outsourcing and also suggesting that a requirement is established that provides a distinct separation of staff of CPA firms and internal and external audit teams.
  • Quality information: The lifeblood of our markets, Levitt, A. (2000). Quality Assurance, 7(2), 65-75. The remarks made by the chairman of the U.S securities and exchange commission, Chairman Authur Levitt, to the Economic Club of new your in new your city, NY in the USA on 18 October 1999.
  • Auditors’ identification with their clients and its effect on auditors’ objectivity, Bamber, E. M., & Iyer, V. M. (2007). Auditing: A Journal of Practice & Theory, 26(2), 1-24. This study empirically models the bond between an auditor and its client. The independence Standard board (ISB) identified an auditor familiarity with the client as a treat to auditor independence. Familiarity with the client is necessary for the auditor to be able to understand the client well enough to plan and perform an effective and efficient audit. It was also discovered that auditors who identify with their clients are likely to acquiesce to the client preferred position. Furthermore, more experienced auditors exhibit a higher level of professionalism as they are less likely to acquiesce the client’s situation.
  • The philosophy and rhetoric of auditor independence concepts, Reiter, S. A., & Williams, P. F. (2004). Business Ethics Quarterly, 14(3), 355-376. This paper discusses the occurrences surrounding the auditor independence professional presentation. The evolution was traced to the character of the auditor from a professional man in the early years in the twentieth century to the more public and abstract figure if the judicial man and the economic man.  The changes in the character of the auditor can be a narrative of the legitimation of changes in the role of auditing and the economic environment.
  • Audit quality and executive officers’ affiliations with CPA firms, Lennox, C. (2005). Journal of Accounting and Economics, 39(2), 201-231. Executive can be affiliated if they haven’t previously worked under their companies audit firms.  Over 70% of affiliations occur when the auditor becomes an employee of the client being audited. But affiliations sometimes occur when the company hires an executive from former COA firms. This article categorically states that affiliated companies are more likely to receive a clean audit opinion than unaffiliated companies.
  • The influence of nonaudit services on perceptions of auditor independence, Jenkins, J. G., & Krawczyk, K. (2001). Journal of Applied Business Research, 17(3), 73-78. This paper discusses how a non-audit service affects the public perception of auditor independence. The recent expansion of these services by the public accounting industry has attracted lots of questions, that can help an auditor who provides non-audit services to remain independent for their clients. The independent auditors are of great value and importance due to their uniqueness to the client.

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