Caste Primacy of Auditor Choice and Independence
Department or Administrative Unit
We examine the caste affiliation of the auditor selected by the corporate boards of directors of Indian firms. The history of the caste system in India is one of discrimination and inequity. The constitutionally mandated quota system in the public sector has shown improvements, but has not trickled into private sector leadership. We find that nearly 96% of Indian corporate boards are dominated by a single caste. The auditing firms are also dominated by the forward castes. Lastly, we find that when boards are dominated by one caste, they select an auditing firm that is also affiliated with that same caste. We examine the board and auditor relationship because they both play an important monitoring role in corporate governance. However, auditor effectiveness can be undermined when there is a lack of independence between them and the firm. The existence of a strong shared social network like caste affiliation compromises that independence.
Dayanandan, A., Donker, H., Nofsinger, J., & Prasad, R. (2020). Caste Primacy of Auditor Choice and Independence. The International Journal of Accounting, 55(04), 1-32. https://doi.org/10.1142/s1094406020500171
The International Journal of Accounting